(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, 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. 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 forebearance 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 forebearance 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.
(11) This subsection shall apply to loans closed before October 1, 2017.
Amendments
2016—Subsec. (c)(11). Pub. L. 114–228 substituted “October 1, 2017” for “October 1, 2016”.
2015—Subsec. (c)(11). Pub. L. 114–58 substituted “October 1, 2016” for “October 1, 2015”.
2014—Subsec. (c)(11). Pub. L. 113–175 substituted “October 1, 2015” for “October 1, 2014”.
2013—Subsec. (c)(11). Pub. L. 113–37 substituted “October 1, 2014” for “October 1, 2013”.
2012—Subsec. (c)(11). Pub. L. 112–191 substituted “October 1, 2013” for “October 1, 2012”.
2010—Subsec. (a)(2). Pub. L. 111–275 designated existing provisions as subpar. (A) and added subpar. (B).
2006—Subsec. (c)(10)(D). Pub. L. 109–233 substituted “paragraphs (5)(B), (6), (7)(B), and (8)(B)” for “clause (B) of paragraphs (5), (6), (7), and (8) of this subsection”.
2003—Subsec. (c)(11). Pub. L. 108–183 substituted “October 1, 2012” for “October 1, 2011”.
2001—Subsec. (c)(11). Pub. L. 107–103 substituted “October 1, 2011” for “October 1, 2008”.
2000—Subsec. (c)(11). Pub. L. 106–419 substituted “October 1, 2008” for “October 1, 2002”.
1997—Subsec. (c)(11). Pub. L. 105–33 substituted “October 1, 2002” for “October 1, 1998”.
1994—Subsec. (c)(6). Pub. L. 103–446, § 907(b), struck out “either” after “defaulted loan”, substituted “sale,” for “sale or acquires the property at such sale for an amount that exceeds the lesser of the net value of the property or the total indebtedness under the loan—”, struck out text of subpar. (A) and subpar. (B) designation before “the liability”, and redesignated cls. (i) and (ii) as cls. (A) and (B), respectively. Prior to amendment, subpar. (A) read as follows: “the Secretary may not accept conveyance of the property except as provided in paragraph (7) of this subsection; and”.
Subsec. (c)(7). Pub. L. 103–446, § 907(a)(1), struck out “that was the minimum amount for which, under applicable State law, the property was permitted to be sold at the liquidation sale—” after “net value and” in introductory provisions.
Subsec. (c)(7)(A). Pub. L. 103–446, § 907(a)(2), substituted “(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” for “the Secretary may accept conveyance of the property to the United States for a price not exceeding” and “loan; or” for “loan; and” and added cl. (ii).
Subsec. (c)(7)(B). Pub. L. 103–446, § 907(a)(3), substituted “paragraph (6)” for “paragraph (6)(B)”.
1993—Subsec. (c)(1)(C). Pub. L. 103–66, § 12006(a)(1), inserted “(including losses sustained on the resale of the property)” after “resale”.
Subsec. (c)(11). Pub. L. 103–66, § 12006(a)(2), substituted “shall apply to loans closed before October 1, 1998” for “shall cease to have effect on December 31, 1992”.
1991—Pub. L. 102–83, § 5(a), renumbered section 1832 of this title as this section.
Subsec. (a)(1). Pub. L. 102–83, § 5(c)(1), substituted “3703(e)” for “1803(e)”.
Subsec. (a)(4)(C). Pub. L. 102–54, § 1, struck out subpar. (C) which read as follows: “The authority to carry out this paragraph shall terminate on March 1, 1991.”
Subsec. (b). Pub. L. 102–83, § 5(c)(1), substituted “3711” for “1811”.
Subsec. (c)(1)(A). Pub. L. 102–83, § 5(c)(1), substituted “3710(a)” for “1810(a)”.
Subsec. (c)(9). Pub. L. 102–83, § 5(c)(1), substituted “3703(b)” for “1803(b)”.
Subsec. (c)(11). Pub. L. 102–54, § 3(a), substituted “December 31, 1992” for “October 1, 1991”.
1989—Subsec. (a). Pub. L. 101–237, § 313(b)(1), (2), substituted “Secretary”, “Secretary’s”, and “Department of Veterans Affairs’ ” for “Administrator”, “Administrator’s”, and “Veterans’ Administration’s”, respectively, wherever appearing.
Pub. L. 101–237, § 304(b), substituted “Except as provided in section 1803(e) of this title, if” for “If” in last sentence of par. (1).
Subsec. (a)(5). Pub. L. 101–237, § 307, added par. (5).
Subsecs. (b), (c). Pub. L. 101–237, § 313(b)(1), (2), substituted “Secretary” and “Department of Veterans Affairs” for “Administrator” and “Veterans’ Administration”, respectively, wherever appearing.
Subsec. (c)(1)(C)(ii). Pub. L. 101–237, § 308(a), inserted “, excluding any amount attributed to the cost to the Government of borrowing funds” before period at end.
Subsec. (c)(11). Pub. L. 101–237, § 308(b)(1), substituted “October 1, 1991” for “October 1, 1989”.
1988—Pub. L. 100–322, § 415(b)(1)(C), (5)(A), redesignated section catchline of section 1816 of this title as section catchline of this section and struck out former catchline which read as follows: “Furnishing information to real estate professionals to facilitate the disposition of properties”.
Subsec. (a). Pub. L. 100–322, § 415(b)(1)(A), (C), redesignated subsec. (a) of section 1816 of this title as subsec. (a) of this section, and in par. (4)(A)(i)(I) substituted “paragraph (2) of this subsection” for “section 1816(a)(2) of this title”.
Subsec. (b). Pub. L. 100–322, § 415(b)(1)(C), redesignated subsec. (b) of section 1816 of this title as subsec. (b) of this section.
Subsec. (c). Pub. L. 100–322, § 415(b)(1)(B), (C), redesignated subsec. (c) of section 1816 of this title as subsec. (c) of this section, in par. (10)(A) inserted “(or such earlier date following the expiration of a reasonable period of time for such sale to occur as the Administrator may specify pursuant to regulations prescribed by the Administrator to implement this subsection)” before period at end, and in par. (10)(B)(ii) inserted “(5)(A) or” after “under paragraph”.
1987—Subsec. (a)(4). Pub. L. 100–198, § 4(a), added par. (4).
Subsec. (c)(1)(D). Pub. L. 100–198, § 5(a)(1)–(3), substituted “Except as provided in subparagraph (D) of paragraph (10) of this subsection, the” for “The” at beginning, “applicable under paragraph (10) of this subsection, and” for “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 Administrator may specify pursuant to regulations prescribed by the Administrator to implement this subsection), and” in cl. (ii), and “regulations prescribed by the Administrator to implement this subsection” for “such regulations” in cl. (iii).
Subsec. (c)(10), (11). Pub. L. 100–198, § 5(a)(4), added pars. (10) and (11).
1984—Subsec. (a)(1). Pub. L. 98–369, § 2512(a)(1)(A)–(C), designated existing first sentence as par. (1), substituted “Administrator of such default. Upon receipt of such notice, the Administrator may, subject to subsection (c) of this section,” for “Administrator who shall thereupon”, and substituted “guaranteed. If the Administrator makes a payment, the Administrator shall” for “guaranteed, and shall”.
Subsec. (a)(2). Pub. L. 98–369, § 2512(a)(1)(A), designated existing second and third sentences as par. (2).
Subsec. (a)(3). Pub. L. 98–369, § 2512(a)(1)(A), designated existing fourth sentence as par. (3).
Subsec. (c). Pub. L. 98–369, § 2512(a)(2), added subsec. (c).
1976—Subsec. (a). Pub. L. 94–324 substituted “the Administrator’s” for “his”.
Subsec. (b). Pub. L. 94–324 substituted “the Administrator” for “he” wherever appearing.
1965—Pub. L. 89–117 designated existing provisions as subsec. (a) and added subsec. (b).
Effective Date of 2013 Amendment
Amendment by Pub. L. 113–37 effective Oct. 1, 2013, see section 4(a) of Pub. L. 113–37, set out as a note under section 322 of this title.
Effective Date of 2010 Amendment
Pub. L. 111–275, title VIII, § 802(b), Oct. 13, 2010, 124 Stat. 2889, provided that:
“The amendments made by subsection (a) [amending this section] shall apply with respect to a housing loan guaranteed after the date of the enactment of this Act [Oct. 13, 2010].”
Effective Date of 1993 Amendment
Pub. L. 103–66, title XII, § 12006(b), Aug. 10, 1993, 107 Stat. 414, provided that:
“The amendments made by this section [amending this section] shall become effective October 1, 1993.”
Effective Date of 1989 Amendment
Pub. L. 101–237, title III, § 308(b)(2), Dec. 18, 1989, 103 Stat. 2075, provided that:
“The amendment made by paragraph (1) [amending this section] shall take effect as of October 1, 1989.”
Effective Date of 1987 Amendment
Pub. L. 100–198, § 4(b), Dec. 21, 1987, 101 Stat. 1316, provided that:
“The amendment made by subsection (a) [amending this section] shall take effect on March 1, 1988.”
Pub. L. 100–198, § 5(c), Dec. 21, 1987, 101 Stat. 1317, provided that:
“The amendments made by subsection (a) [amending this section] shall apply to defaults which occur more than 60 days after the date of the enactment of this Act [Dec. 21, 1987].”
Effective Date of 1984 Amendment
Pub. L. 100–136, § 1(a), Oct. 16, 1987, 101 Stat. 813, provided that:
“Notwithstanding section 2512(c) of the Deficit Reduction Act of 1984 (
Public Law 98–369) [set out below], the provisions of section 1816(c) [now 3732(c)] of title 38, United States Code, shall continue in effect through November 15, 1987.”
Pub. L. 98–369, div. B, title V, § 2512(c)(1), July 18, 1984, 98 Stat. 1120, provided that:
“The amendments made by subsection (a) [amending subsec. (a) and adding subsecs. (c) and (d) of section 1816 [now 3732(a), (c) and 3733(a)] of this title] shall take effect on October 1, 1984.”
Pub. L. 98–369, div. B, title V, § 2512(c)(2), July 18, 1984, 98 Stat. 1120, which provided that subsecs. (c) and (d) of section 1816 (now 3732(a), (c) and 3733(a)) of this title would cease to be effective on Oct. 1, 1987, was repealed by Pub. L. 100–198, § 5(b), Dec. 21, 1987, 101 Stat. 1317.
Effective Date of 1976 Amendment
Amendment by Pub. L. 94–324 effective June 30, 1976, see section 9(a) of Pub. L. 94–324, set out as a note under section 3701 of this title.
“Net Value” Defined With Respect to Loans Closed Before October 1, 1993
Pub. L. 102–389, title I, Oct. 6, 1992, 106 Stat. 1574, provided in part:
“That notwithstanding the provisions of
38 U.S.C. 3732(c)(1)(C) and (c)(11) or any other law, with respect to any loan guaranteed for any purpose specified in
38 U.S.C. 3710 which was closed before October 1, 1993, the term ‘net value’ for purposes of paragraphs (4) through (10) of
38 U.S.C. 3732[(c)] shall mean ‘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 of the Government of borrowing funds’.”