Full text of District Notices (Federal Reserve Bank of Dallas) : [Guaranty of Loans, Regulations Under Title III, Pamphlet]

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F ederal

reserve

Ba n k

O F DA LLAS

Dallas, Texas, January 12, 1945

To AH Banking Institutions

in the Eleventh Federal Reserve District:
There are enclosed, two pamphlets published by the United States Vet­
erans’ Administration regarding the guaranty of loans under the Service­
men’s Readjustment Act of 1944. One of these relates to the guaranty of
loans on farms and farm equipment, and the other relates to the guaranty
of loans for the purchases of businesses, etc. Specimen copies of the forms
to be used in connection with loans of the types covered by these pamphlets
will, upon receipt, be distributed to all banks in this district.
Requests for supplies of forms and additional information regarding the
Servicemen’s Readjustment Act of 1944 should be addressed to a Regional
Office of the United States Veterans’ Administration. Regional Offices serv­
ing this district are located at Waco, Texas; Muskogee, Oklahoma; New
Orleans, Louisiana (333 St. Charles Street); Albuquerque, New Mexico, and
Tucson, Arizona.
Yours very truly,
R. R. GILBERT
President

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UNITED

STATES

OF

AMERICA

VETERANS/ ADM INISTRATION

GUARANTY OF LOANS
Regulations Under Title III
(FARMS AND FARM EQUIPMENT)
SERVICEMEN’S READJUSTMENT ACT OF 1944
(Public Law 346-— 78th Congress)
(Chapter 268— 2d Session)
(58 Statutes at Large 284)
(38 U. S. Code 693 et seq.)

(N O T E :

This pamphlet covers the subject of Guaranty of Loans for

the Acquisition of Farms and Farm Equipment pursuant to Section
502 of the A ct.

The subject of the Guaranty of Loans for the Pur­

chases of Businesses, etc., pursuant to Section 503 will be printed in a
separate pamphlet.

The subject of Guaranty of Home Loans has been

printed in a separate pamphlet.)

This publication may be procured from the
Superintendent of Documents, U. S. Government Printing Office,
Washington 25, D. C., at 5 cents per copy.

FOREWORD
The Servicemen’s Readjustment Act of
1944 and these regulations constitute a
part of each contract of guaranty issued
by the Administrator of Veterans’ A f­
fairs on behalf of the United States of
America, pursuant to Title III of said
Act.
The officials and employees of the Vet­
erans’ Administration from time to time
assigned to duties in connection with the
administration of the Act shall act on
behalf of the Administrator of Veterans’
Affairs, and when so acting within the
scope of authority delegated to them
shall for all purposes of the Act and
these regulations be deemed to be act­
ing for said Administrator.
Central Office of the Veterans’ Admin­
istration, Washington 25, D. C., is the
main office of the Administrator of Vet­
erans’ Affairs. The functions pursuant
to Title III of the Act will also be per­
formed in field offices of the Veterans'
Administration from time to time desig­
nated for that purpose. Transactions
and communications with, and contracts
by such designated field offices shall have
the same effect as if with, or made by,
Central Office.
These regulations should be carefully
read.
The completed application or

other papers submitted should be care­
fully examined by the applicants, (bor­
rowers and lenders) in order to be cer­
tain of accuracy and avoid any possible
embarrassment resulting from errors.
It will facilitate the service of the Vet­
erans’ Administration to the veterans
and the lenders if, in correspondence,
reference is made to the appropriate
section numbers, if any, involved in the
subject of the correspondence.
In view o f the large number o f vet­
erans with the same or similar names, it
is important not only in correspondence,
but also in documents to use the veter­
an’s full first name instead of his initial
only, and also his middle initial. If un­
objectionable, it will be helpful to use his
full middle name. In addition to the full
name, other available identifying data
should be used in correspondence, such
as serial number allocated to the veteran
while in active service, rank, and organi­
zation at’ date of discharge, current resi­
dence address, etc. In mortgages and
other documents it will be desirable to
use the service serial number in addi­
tion to the full name, although if there
is objection the number will not be re­
quired. If there has been a guaranty ap­

plication previously submitted by the
veteran and the number assigned thereto
by the Veterans’ Administration is
known, that number should be used in all
communications; and on all documents
pertaining to that application.
It should be clearly understood, that
the Act does not authorize the Veterans’
Administration or the Administrator of
Veterans’ Affairs to lend money to the
veteran under Title III; but only to
guarantee loans within the prescribed
limitations.
NOTICE
Federal statutes provide severe penal­
ties including forfeitures, fines and im­
prisonment, for fraud on the part of the
applicant and also as to “ any person who
shall knowingly make or cause to be
made, or conspire, combine, aid, or as­
sist in, agree to, arrange for, or in any
wise procure the making or presentation
of a false or fraudulent affidavit, decla­
ration, certificate, statement, voucher, or
paper, or writing purporting to be such"
concerning any application for the guar­
anty of a loan by the Administrator.
(38 U. S. C. A. 697, 715, 450, 451, 454 (a ),
556 ( a ) ; 18 U. S. C. A. 80.)

TITLE 38—PENSIONS, BONUSES AND
VETERANS’ RELIEF1
Chapter I—Veterans’ Administration
P art 36— R egulations U nder Service­
men ’s R eadjustment A ct of 1844
GUARANTY

OF LOANS ON FARMS
EQU IPM EN T

AND

FARM

The following regulations govern the
guaranty of loans on farms and farm
equipment under Title III of the Service­
men’s Readjustment Act of 1944:
Sec.
36.4100 Definitions.
(a) Administrator.
(b) United States.
(c) State.
(d) Designated agency or agency.
(e) Federal agency.
(f) Guaranty.
(g) Mortgage.
(h) Secondary or junior loans.
(i) Guaranteed loan.
(j) Farming operations.
(k) Reasonable normal value.
(l) Real property.
(m) Indebtedness.
(n) Note.
(o) Appraiser.
(p) Certificate of title.
(q) Credit report.
(r) Eligible veteran.
(s) Eligible lenders.
(t) Creditor.
(u) Debtor.
(v) Conducted by a veteran.
(w) Interest.
86.4101 Miscellaneous.
LOANS ELIGIBLE FOR GUARANTY

86.4102 Eligible loans.
36.4103 Agricultural loans.
86.4104 Repairs, improvements, taxes, delin­
quent indebtedness, etc.
36.4105 Loan for delinquent indebtedness
and taxes on farm home.
36.4106 Prior liens.
36.4107 First liens required.
36.4108 Mortgages required.
36.4109 Transfer of title.
36.4110 Obligation of guarantor.
36.4111 Contract provisions.
36.4112 Repayment provisions.
36.4113 Prepayments.
36.4114 Pro rata decrease of guaranty.
36.4115 Insurance coverage required.
36.4116 Loan charges.
36.4117 Interest.
36.4118 Advances.
36.4119 Construction loans.
GUARANTY BY THE ADMINISTRATOR

36.4120 Limits.
36.4121 Second loan under section 605 (a).
36.4122 Two or more eligible veterans or
borrowers.
36.4123 Maximum liability where there are
two or more veterans.
36.4124 Veteran’s application.
86.4125 Papers required.
36.4126 Recommendation for approval of
guaranty.
36.4127 Administrator’s action on applica­
tion.
36.4128 Execution and form of guaranty.
36.4129 Disposition of papers.
36.4130 Loan procedure after approval of
guaranty.
36.4131 Report of closing loan.
^
36.4132 Construction loans.
36 4133 When guaranty does not apply.
claim under a guaranty

36.4134 Default.
36.4135 Claim on notice of default.
36.4136 Legal action.1
1As printed in the F ederal R egister, Vol­
ume 9, Number 246, Washington, Saturday,
December 9, 1944.

621701°— 44

Sec.
36.4137
36.4138
86.4139
36.4140
86.4141
36.4142
36.4143
36.4144
36.4145
36.4146
36.4147
36.4148
36.4149
36.4150
36.4151

Notice of suit and subsequent sale.
Death of veteran or other owner.
Death or insolvency of creditor.
Filing claim under guaranty.
Options available to Administrator.
Refinancing
and
extension
of
guaranty.
Subrogation.
Future action against mortgagor
Suit by Administrator.
Creditor’s records and reports re­
quired.
Failure' to supply information.
Notice to Administrator.
Right to inspect books.
Forms, construction to be placed
on references to.
Disqualified lenders and bidders.

Au t h o r it y : §§ 36.4100 to 36.4151, inclusive,
issued under 58 Stat. 284.

§ 36.4100 Definitions. Wherever used
in these regulations, unless the context
otherwise requires, the terms defined in
this section shall have the meaning
herein stated, namely:
(a) “ Administrator” ‘means the Ad­
ministrator of Veterans’ Affairs or any
employee of the Veterans’ Administra­
tion designated by him to act in his
stead.
(b) “ United States” used geographi­
cally means the several States, Terri­
tories and possessions, and the District of
Columbia.
(c) “ State” means any of the several
States, Territories and possessions, and
the District of Columbia.
(d) “Designated agency” or “ agency”
as used in respect to processing applica­
tions for guaranty of loans, means any
Federal instrumentality designated by
the Administrator (including Veterans’
Administration if so designated) to cer­
tify whether an application meets the re­
quirements of the act and regulations,
and recommend whether the application
should be approved if the applicant is
found eligible.
(e) “ Federal agency” as used with re­
spect to agencies making, guaranteeing,
or insuring primary loans, means any
Executive Department, or administra­
tive agency or unit of the United States
Government (including a corporation es­
sentially a part of the Executive Branch)
at any time authorized by law to make,
guarantee or insure such loans.
(f) “ Guaranty” means the obligation
of the United States of America assumed
by virtue of the guaranty by the Ad­
ministrator as provided in Title III of
the Servicemen’s Readjustment Act of
1844 (58 Stat. 284; 38 U.S.C. 693), and
subject to the limitations and conditions
thereof and of these regulations. The
subject of the guaranty is that portion
of an eligible loan procured by an eligible
veteran which may be subject to being
guaranteed as provided in said Title III,
as determined by the Administrator upon
application in accordance with these reg­
ulations.
(g) “ Mortgage” means an applicable
type of security instrument commonly
used or legally available to secure loans
or the unpaid portion of the purchase
price of real or personal property in a
State, District, Territory or possession
of the United States of America in which
the property is situated. It includes, for
example, deeds of trust, security deeds,
escrow instruments, real estate mort­
al

gages, conditional sales agreements,
chattel mortgages.
(h) “ Secondary” or “ junior” loan
means a loan which is secured by a lien
or liens subordinate to any other lien or
liens on the same property.
(i) “ Guaranteed loan” means a loan,
unsecured, or secured by a primary lien,
or where permissible under the act and
these regulations, a secondary lien, which
loan is guaranteed in whole or in part
by the Administrator as evidenced by
endorsement thereon; or by a Loan
Guaranty Certificate issued by the Ad­
ministrator, and which shall have be­
come effective as prescribed by these
regulations; or by such other legal evi­
dence as may be provided by the Admin­
istrator.
(j) “Farming operations” are those
which involve actual production and
marketing of crops, livestock, livestock
products, or other agricultural commodi­
ties, and which constitute the applicant’s
major occupation. No acreage limit will
be established but size will be a factor in
determining practicability.
(k) “Reasonable normal value” for
the purposes of the act is that which can
be justified as a fair and reasonable price
to be paid for the real or personal prop­
erty for the purposes for which it is be­
ing acquired, assuming a reasonable
business risk, but without undue specu­
lative or other hazard as to the future of
such value. There must also be taken
into consideration the normal earning
capacity value of the farm or other
property, assuming average managerial
ability, and yields and prices for farm
products that may reasonably be antici­
pated during the period of the loan.
There will not be unreasonably rigid ad­
herence to long-time average prices or
reliance upon a continuation o f abnor­
mal prices.
(l) (1) “ Real property” as used in
section 502 of the act refers to an in­
terest in realty defined in 'th is section
and subject to the conditions therein.
It includes buildings and other improve­
ments that are deemed to be real prop­
erty under the law of the State where
situated.
(i) An interest in realty may be a fee
simple estate, or certain other estates
indicated in subdivisions (i) to (vi),
inclusive, of this subparagraph including
an estate for years, eligible as security
for guaranteed loans. But in any event
the estate shall be one limited to end
at a date more than 14 years after the
ultimate maturity date of the loan, or
when the fee simple title shall vest in
the lessee; except that, if it is a lease­
hold that terminates earlier, it shall
nevertheless be acceptable if lessee has
the irrevocable right to renew for a term
ending more than 14 years after the ulti­
mate maturity date of the loan or until
the fee simple title shall vest in lessee;
provided the mortgagee obtains a mort­
gage lien of the required dignity upon
such option right or anticipated reversion
or remainder in fee.
(ii) A life estate or other estate of
uncertain duration is excluded, unless
the remainder interests are also encum­
bered by liens of the same dignity to
secure the same debt.
(iii) A remainder interest in realty
shall be eligible as security for a guaran­

2
(2) Shall have been discharged or re­
teed loan only in the event that all the
(3)
Livestock, equipment, machinery
owners of intervening immediate or re­
leased from active service under condi­
or implements; for the purchase price of,
mainder interests lawfully can and do
tions other than dishonorable either (i)
or loan upon, which a guaranty under
after active service of ninety days or
(a) join in the mortgage in such manner section 502 is applied for shall be those
as to subject all such intervening estates
to be used directly in farm operations to
more, or (ii) because of injury or dis­
ability incurred in service in line of duty,
to the lien; or (b) execute and deliver
be conducted by the veteran on farm
land in which he holds any estate men­
a lease or other proper conveyance to the
irrespective of length of service; and
owner of the ultimate remainder in fee
(3) Applies for the benefits of this
tioned in subdivisions (i) to (vi), in­
simple in such manner as to assure his
clusive, of paragraph (1) (1) of § 36.4100,
Title within two years after separation
legal right to possession and enjoyment
or any farm land to the use and occu­
from the military or naval forces, or
until the vesting of his ultimate re­
pancy of which he is entitled for a suffi­
within two years after the officially de­
mainder interest.
cient period to make a suitable crop.
clared termination of World War II,
The latter right shall be evidenced by a
(iv) If other than a fee simple estate
whichever is later. In no event, how­
lease, or by an appropriate letter from
ever, may an application be filed later
or estate for years with minimum dura­
the landlord, evidencing the veteran’s
tion as stated in subdivision (i) of para­
than five years after such termination of
right to use of the land.
graph (1) (1) of this section is offered as
such war.
security, full information may be sub­
(m) “ Indebtedness” means the un­
(s) “ Eligible lenders” are persons,
mitted to the Administrator before taking
paid principal and accrued interest on
firms, association, corporations and gov­
the note, bond or other obligations, the
application from the veteran. The Ad­
ernmental agencies and corporations,
subject of the guaranty, and includes
ministrator shall determine the elegieither State or Federal. (Section 500
also taxes, insurance premiums and any
bility of any such estate.
(c).)
other items for which the debtor is liable
(v) The existence of any of the follow­
(t) “ Creditor” means the payee, or
under the terms of the mortgage or other
ing will not require denial of the guar­
any subsequent holder of the indebted­
contract, including proper contractual or
ness, and includes a mortgagee.
anty, hence will not require special sub­
statutory trustee fees and attorney fees,
(u) “Debtor” means the maker of the
mission :
if any.
(a) Outstanding easements for public
note, or obligor in any other obliga­
(n) “ Note” means a promissory note,
tion, or any other person who is, or be­
utilities, party walls, driveways, and sim­
a bond, or other instrument evidencing
comes, liable thereon, by reason of a
ilar purposes;
the debt and the debtor’s promise to pay
contract of assumption or otherwise.
(b) Customary building or use restric­
same.
tions for breach of which there is no re­
(v) “ Conducted by a veteran” means
(o) “ Appraiser” means an individual
personally directed and operated by a
version and which have not been violated
or firm or corporation of recognized
veteran on the site, with or without hired
to a material extent;
standing, approved in writing by the Ad­
labpr; not solely operated by a tenant
(c) Slight encroachments by adjoining
ministrator to appraise property. An
or an employee who does not receive
improvements;
applicant for designation as an approved
supervision and direction by the veteran.
(cZ) Outstanding water, oil, gas or
appraiser shall show to the satisfaction
(w) “ Interest” means the compensa­
other mineral rights which do not and
of the Administrator that he is of good
tion fixed by law, or by the parties to a
will not materially impair the value for
character
and
that
his
experience
and
contract, for the use or detention of, or
farming purposes, and which are cus­
information enable him to form sound
forbearance with respect to money, irre­
tomarily waived by prudent lenders in the
opinions
as
to
the
reasonableness
of
the
spective of the name applied to such
community; Provided, however, That if
purchase
price
or
cost
of
property
to
be
compensation.
there is outstanding any legal rights to
appraised in the territory in which he
quarry, mine, or drill within 400 feet of
§ 36.4101 Miscellaneous. Throughout
expects to operate. He shall also be ex­
the principal residence or barn on the en­
these regulations unless the context
perienced
in
determining
the
earning
cumbered farm, the application for guar­
otherwise requires; (a) the singular in­
capacity of farms.
anty may be denied for that reason, un­
cludes the plural; (b) the masculine in­
A
list
of
appraisers,
considered
by
the
less upon consideration of all the facts,
cludes the feminine and neuter; (c) per­
Administrator to be in good standing at
the Administrator determines otherwise.
son includes corporations, partnerships
the
time
these
regulations
become
effec­
Such determination at the option of the
and associations; (d) month means cal­
tive, may be approved.
lender or borrower may be obtained upon
endar month, i. e., the period beginning
(p) “ Certificate of title” means with
a special submission of all the facts prior
on a certain date in one month and end­
respect to real property a written and
to taking application for guaranty.
ing at midnight the preceding date of
signed opinion or statement as to title by
(vi) A mortgage on an undivided in­
the next month; (e) “ the act” or “ the
a qualified member of the bar of, or by a
terest in realty shall not be acceptable
statute” means the Servicemen’s Read­
title company authorized to do such busi­
unless all co-tenants of the veteran join
justment Act of 1944; Ch. 268, 78th Con­
ness
in,
the
jurisdiction
in
which
the
in the mortgage and unless such joinder
gress, 2d Session (Public No. 346) 58
mortgaged property is situated; or at the
has the legal effect of creating a lien on
Stat. 284; 38 U. S. C. 693; (f) Title HI
option of borrower and lender a title
the property such as is otherwise re­
means Title HI o f the act.
insurance or guaranty contract by a cor­
quired. 'I n such cases it shall not be
poration
authorized
to
engage
in
such
LOANS ELIGIBLE FOR GUARANTY
required that the co-tenants join in, en­
business in the State wherein the prop­
dorse, or otherwise become personally
erty
is
situated;
or
appropriate
evidence
§
36.4102
Eligible loans, (a) The real
liable on the veteran’s indebtedness.
of title in the proposed encumbrancer
or personal property encumbered to se­
Notwithstanding such joindqr in the
pursuant to a Torrens or other similar
cure a loan guarantee pursuant to Title
mortgage by the co-tenants the value of
title registration statute.
III of the Act shall be situated within
the security for purpose of guaranty shall
(q) “ Credit report” means the report
the United States as defined in § 36.4100
be determined with respect to the indi­
submitted by any credit reporting agency
vidual interest of the veteran only, and
(b).
of at least five years’ experience with
the guaranty will be limited to the proper
(b)
(1) The veteran must possess such
facilities
for
national
coverage,
approved
proportion of that sum, irrespective of
actual knowledge of farming and be of
by
the
Administrator,
or
any
other
form
the actual amount of the loan.
such character and industry as to indi­
(2)
“ Personal property” means tangi­ o f report acceptable to the Administrator
cate that because of his ability and ex­
for the purpose of determining the appli­
ble or intangible property other than
cant’s credit standing. (See §§ 36.4124 perience relevant to farming he likely will
“ real property” as defined in paragraph
be able to succeed in the conduct of farm ­
(1) (1) of § 36.4100 if such property is to and 36.4125 before ordering credit re­
port) .
ing operations. Agricultural courses in
be used in farming operations conducted
(r) “Eligible veteran” means a veteran
schools of recognized standing and other
by the veteran as prescribed in these
training will be given due weight in, eval­
who;
regulations. It includes property which
(1)
Served in the active military or uating experience.
by reason of the contract of the seller
and purchaser remains personalty not­
naval service of the United States on or
(2)
It must appear that the veteran’s
withstanding that except for such con­
after September 16, 1940, and before the
financial situation will be such that he
officially declared termination of World
tract it would become a “ fixture” , or oth­
likely will be able to carry on the farming
War II;
erwise a part of the realty.
enterprise successfully. The amount of

3
“ readjustment allowance” , if any, pay­
(e) “ Special assessments” means any
existence of tax or special assessment
prior liens will not necessarily disqualify
able pursuant to Title V of the act (38
charges for improvement purposes as­
security which is adequate and otherwise
U. S. C. 696, 696d) shall be considered sessed against the real property.
(f) “ Delinquent indebtedness” means
in this connection.
acceptable.
(c)
A farming operation must be of past due amounts of principal or interest
§ 36.4108 Mortgages required, ( a ) ( 1 )
(and without giving effect to any accel­
sufficient size and productivity- to enable
Each loan guaranteed in whole or in
eration provisions) on an obligation se­
an operator of average ability, operating
part by the Administrator shall be se­
cured in whole or in part by lien or liens
under normal circumstances as to yields
cured by a “ mortgage” except that when
on property of an eligible veteran and
and prices, to derive sufficient subsistence
the principal amount of a loan to be
occupied as his home. (See § 36.4105
and income from it to meet necessary liv­
guaranteed does not exceed $500 and the
(a).)
ing and operating expenses and debt ob­
lender does not require a mortgage, the
(g) “ Purchased or to be purchased” as
ligations. The area of the farm unit and
Administrator may nevertheless guar­
used in section 502 (1) of the act refers
its composition (i. e., crop acres, pasture,
antee such loan provided it complies
to
real
or
personal
property
to
be
used
woodland, etc.) must be carefully re­
otherwise with the Act and these regu­
for
the
purpose
stated
in
section
502
of
lated to and reconciled with the type of
lations. (As to procedure see § 36.4124
the act, whether the property is pur­
operations which would be undertaken by
(c) and ( f ).)
chased contemporaneously with such ap­
a typical operator. Improvement and
(2) If indebtedness of the veteran is
plication, or is to be purchased subse­
farm facilities must be appropriate, or
not adequately secured by a lien on the
quent thereto. But as to any loan for a
feasibly adjustable, to operations to be
entire interest in specific chattels or
future purchase the guaranty will be­
undertaken.
other personal property, but is secured
come effective only from the time the
by undivided interests therein, the re­
§ 36.4103 Agricultural loans. Section
purchase is consummated.
quirements of § 36.4100 (1) (1) (vi) re­
502 of the act provides for granting to
lating to undivided interests in realty
§ 36.41C5 Loan for delinquent indebt­
an eligible veteran “ the guaranty of a
shall be applicable to the interests in
edness and taxes on farm home, (a)
loan to be used in purchasing any land,
said chattels or other personal property.
Under appropriate circumstances a
building, livestock, equipment, machin­
(3) The “ mortgage” shall include all
guaranty pursuant to section 501 (b) of
ery, or implements, or in repairing, alter­
intangible property rights which are inci­
the act may be obtained if the loan is
ing, or improving any buildings or equip­
dent to the encumbered property, real or
“ for the purpose of * * * paying
ment, to be used in farming operations
personal.
delinquent indebtedness, taxes, or special
conducted by the applicant” if the Ad­
assessments on residential property
(4) If the encumbered real or personal
ministrator of Veterans’ Affairs finds
property is owned by a partnership all
owned by the veteran and used by him
that:
partners shall join in the encumbrance
as his home * *
Section 501 (b)
(a) The proceeds of such loan will be
or their authorization to the person or
is applicable to a farm if it is the vet­
used in payment for real or personal
persons executing the encumbrance shall
eran’s home. (See § 36.4104 (d), (e),
property purchased or to be purchased
be in writing in due form and properly
( f ) .)
by the veteran, or for repairing, altering
(b) Guaranty of a loan for altera- - acknowledged. The Veterans’ Adminis­
or improving any buildings or equipment,
tration will not require that a partner
tions, improvements, or repairs (as each
to be used in bona fide farming opera­
other than the veteran become person­
is defined and limited in § 36.4104) for
tions conducted by him;
ally liable on the obligation.
the farm may be granted if otherwise
(b) Such property will be useful in
Rroper, notwithstanding that such loan
(b) The law of the “ State” where the
and reasonably necessary for efficiently
is not secured by a first lien.
contract is made determines the capacity
conducting such operation;
o f the parties to contract. Similarly
(c) Satisfactory evidence will be re­
(c) The ability and experience of the
the law of the “ State” wherein the real
quired to establish that:
veteran, and the nature of the proposed
estate or personal property is situated
(1) The proceeds of the loan will be
farming operations to be conducted by
determines the capacity o f “mortgagor”
used for an appropriate purpose as pre­
him are such that there is a reasonable
to encumber and of the “ mortgagee” to
scribed in paragraphs (a) and (b) of
likelihood that such operations will be
this section.
hold the legal rights resulting from en­
successful; and
cumbrance. The act does not modify
(2) The amount of the loan will bear
(d) The purchase price paid or to be
such law of the “ State” . The guaranty
a proper relation to the value and earn­
paid by-the veteran for such property
by the Administrator will be available
ing power of the property, and the alter­
does not exceed the reasonable normal
only in the event that under the appli­
ations, improvements or repairs of the
value thereof as determined by proper
cable “ State” law the contract between
real or personal property will enhance
appraisal.
the borrower and lender is binding on
its value to a reasonable degree.
§ 36.4104 R e p a i r s , improvements,
both, and the “ mortgage” has the legal
§
36.4106
Prior
liens—
(a)
Real
prop­
taxes, delinquent indebtedness, etc. (a)
effect intended. Paragraph (b) of this
erty. The existence of a lien or liens
“ Alterations” in respect to a farm, means
section will be applicable particularly in
on
the
real
property
in
respect
to
which
any structural changes in or additions to
cases involving minors, “ persons of un­
a
guaranty
of
a
loan
is
sought
pursuant
an existing building, or equipment, on or
sound mind” , and persons under other
to
section
501
(b)
will
not
necessarily
re­
to be used on the farm, including heat­
legal disability by reason of the law of
quire a denial of the application for
ing and other equipment that become
the “ State” . It will be applicable also
guaranty;
but
full
consideration
will
be
fixtures; or operations of a protective
in cases involving “mortgage” or other
given
to
the
amount,
rate
of
interest,
and
nature, which increase the usefulness of
loans which any guardian, conservator,
maturity
dates
o
f
the
primary
loan
in
such buildings or equipment.
or other fiduciary seeks to make, or ob­
determining whether a suitable relation
(b) “Improvements” means construc­
tain; and to a guaranty thereof for
will exist between the veteran’s obliga­
tion of new buildings (other than the
which application is submitted.
tion
and
probable
available
income.
main residence), new or improved fenc­
(c) Type of loan and mortgage. (1)
(b)
Personal property. Unless sec­ Except as otherwise provided in para­
ing, installation or extension of water
tion
501
(b)
of
the
act
is
applicable,
or
supply, or of electricity for domestic or
graph (a) of this section each loan guar­
unless the circumstances are extraordi­
other purposes on the farm, sewers and
anteed under the provisions of Title III
nary,
a
loan
which
is
to
be
secured
by
other waste disposal systems on the farm,
must be evidenced by a “ note” or “ notes”
a
lien
on
personalty
shall
be
secured
by
secured by appropriate security instru­
silos, barns, and other structures thereon.
a first lien thereon. (See §§ 36.4104 and
ment or instruments (“mortgage legally
(c) “Repairs” means the work and ma­
36.4105.)
sufficient in the jurisdiction in which the
terial necessary to restore the building or
property to be encumbered is situated” ) ,
§ 36.4107 First liens required. Ex­
fixture therein, or the equipment, to a
including a pledge or hypothecation
condition that is useful and appropriate
cept as provided in section 505 of the act,
when appropriate.
loans for the purpose of purchasing a
to the circumstances, the need therefor
(2)
A term loan, which is in accord
farm with or without a residence there­
having arisen because of wear and tear,
with applicable State or Federal law, and
on, and loans for constructing a resi­
accident or other cause.
regulations, if any, may be eligible for
dence thereon, and in respect to which
(d) “Taxes” means general or spe­
guaranty if the amount of the loan to be
any guaranty is sought, shall be secured
cial taxes assessed against the real prop­
guaranteed plus the unpaid amount of
by a first lien on the property, but the
erty.

4
all obligations secured by liens superior
§ 36.4M.2 Repayment provisions, (a)
to the lien securing the proposed loan
If the loan be an amortized loan the lend­
does not exceed two-thirds of the “ rea­
er and borrower may contract for peri­
sonable normal value” of the property
odical payments at monthly or other in­
encumbered to secure the loan and if the tervals, but not less frequently than an­
ultimate maturity date of the “ mort­
nually, subject to the provisions of
gage” indebtedness so secured, and to be
§ 36.4108 (c) (3).
guaranteed, is not more than five years
(b) If the mortgagor consents the
from the date of the “ note” . Such supe­
mortgage may provide that such monthly
rior liens shall not be “ mortgage” liens
or other periodical payment shall in­
except when the guaranty is issued pur­
clude in addition to the proper amount to
suant to § 36.4105 and § 36.4106 of these
be credited to the principal and interest
regulations.
a proportionate part of the estimated
(3)
Except as provided in subpara­ amounts required annually for all taxes,
graph (2) of this paragraph the loan
rents, special assesments, if any, and fire
shall be amortized. If the obligation to
and other hazard insurance premiums.
be amortized is secured by realty it may,
Such provisions may direct the method of
and except for a period not in excess of crediting the additional amounts included
the first three years shall, require peri­
in the periodical payments for the pur­
odical payments not less frequently than
poses stated in this paragraph.
annually. The amounts so payable shall
(c) The method may be by crediting
be substantially equal as to principal, or
the note with the amounts so received
if the parties so agree, as to principal and
and debiting same with disbursements by
interest. In any event they shall be such
the creditor for such purposes; or by
as will result in payment of the entire
crediting and debiting a separate “ trust
principal and interest within not more
account”, or otherwise as the debtor and
than 20 years from the date of the loan,
creditor agree. Unless otherwise provid­
or the date of assumption by the veteran,
ed by the parties, all periodical payments
whichever is later. At the request of the
made by the debtor on the obligation
mortgagor the payments for the first year
shall be applied to the following items in
shall be less than the amounts required
the order set forth;
in other years by the sum representing
(1) Taxes, special assessments, fire and
the interest charge on the guaranteed
other hazard insurance premiums and
part of the loan, and which interest
rents (allocated among such items as the
charge the Administrator will pay at the
creditor elects);
end of the first year. The mortgagor and
(2) Interest on the mortgage debt; and
mortgagee may agree that no payment
(3) Principal of the mortgage debt.
on principal will be required during a
§ 36.4113 Prepayments, (a) When
period not extending beyond the first
the debt is to be amortized the note or
three years. The ultimate maturity, and
other evidence thereof, or the mortgage
the dates and amounts of periodical pay­
securing same, shall contain appropriate
ments, shall be fixed so as to maintain
provisions granting any person liable for
until the ultimate maturity substantially
such debt, the right to pay at any time
the same ratio between the indebtedness
the entire unpaid balance or any part
and the value of the real and personal
thereof. Unless otherwise agreed all
property encumbered to secure same, tak­
such prepayments shall be credited to
ing into consideration the fact that the
the unpaid principal balance of the loan
useful life of portions of the real or per­
as of the due date of the next instal­
sonal property will have ended prior
ment.
No premium shall be charged for
thereto.
any partial or entire prepayment.
§ 36.4109 Transfer of title. The con­
(b) Any person liable shall be entitled
veyance of, or other transfer of title to
to prepay a term loan, or any part there­
the property after the creation of a lien
of, upon not less than one month’s
thereon to secure the veteran’s debt,
notice. The note or mortgage shall so
which is guaranteed in whole or in part
provide.
by the Administrator, shall not terminate
(c) Any prepayment shall be applied
or otherwise affect the contract of guar­
in the manner and to the items directed
anty, unless (a) the “ creditor” by express
by the person making the prepayment.
agreement for that purpose releases or
§ 36.4114 Pro rata decrease of guar­
otherwise discharges the veteran from
anty. The amount of the guaranty
personal liability thereon; or (b) by in­
shall decrease pro rata with any de­
dulgence of, or by agreement with, the
crease in the amount of the unpaid prin­
veteran’s immediate or remote grantee
cipal of the loan, prior to the date the
or vendee contrary to these regulations
claim is submitted.
and without the consent of the Adminis­
trator the creditor so alters the contract
§36.4115 Insurance c o v e r a g e re­
made by the veteran with the lender as
quired. (a) Buildings, the value of which
to cause discharge of the veteran by
enter into appraisal forming the basis
operation of law.
for the loan guaranteed, shall be insured
against fire, and other hazards against
§ 36.4110 Obligation of guarantor. To
which it is customary in the community
the extent prescribed the obligation of
to insure, and in reasonable amount at
the United States is that of a guarantor,
least equal to the amount by which the
not an indemnitor.
loan exceeds the value of the encumbered
§ 36.4111 Contract provisions. Sub­
land plus that of the improvements in­
ject to the provisions of the act and these
cluded in the appraisal but which are not
regulations, the contract between the
subject to the hazards insured against:
lender and borrower may contain such Provided: That upon a satisfactory show­
provisions as they agree upon and which
ing at the time of the application for
are reasonable and customary in the
guaranty that (1) it is impossible or im­
locality where the property is situated.
practicable to obtain such insurance be­

cause of location, prohibitive cost, or
other good reason; (2) prudent lenders
in such community customarily do not
require such insurance, or some portion
thereof, (amount or hazard) and (3) the
lender submitting the application is will­
ing to make the loan without insurance
coverage on one or more of the build­
ings, or without certain coverage, or
in a reduced amount, and subject to
the provisions of paragraphs (b) and
(c) of this section; the Administrator
may at the time of approving the ap­
plication waive all or part of such in­
surance requirements, subject to the pro­
visions of said paragraphs (b) and (c)
of this section. No waiver will be granted
on the basis of premium cost in any case
wherein the premium cost on an annual
basis does not exceed $5.00 per $1000 of
insurance against the hazard of fire, or
$10.00 per $1000 for fire and all other
hazards covered by the insurance. For
loans on personalty insurance collectible
in amount equal to the debt and against
the hazards usually insured against, if
reasonably available at reasonable cost,
shall be required. The insurance cover­
age on personalty will be a factor in de­
termining the practicability of the loan.
The procuring of insurance of the
amount and coverage stated in the ap­
proved application shall constitute con­
clusive evidence of waiver by the Ad­
ministrator of insurance in excess of
the amount stated in or in connection
with the application and also all hazards
and property not mentioned therein as
hazards and property to be covered.
The creditor shall require that there
be maintained in force such insurance of
the coverage stated in the approved ap­
plication in an amount not less than the
amount stated or the amount of the
unpaid indebtedness whichever is the
lesser.
In the event insurance becomes un­
available the fact shall be reported to the
Administrator for determination whether
waiver shall be granted or loan declared
in default.
(b) For the sole purpose of determin­
ing the amount payable upon a claim
under the guaranty after an uninsured
loss (partial or total) has been sustained,
the unpaid balance of the loan (except
as provided in paragraph (c) of this sec­
tion) wifi be deemed to have been reduced
. by an amount equal to the amount of the
uninsured loss, but in no event below an
amount equal to the value of the land
and other property remaining and sub­
ject to the mortgage.
(c) There shall be no reduction of the
amount of the guaranty as provided in
paragraph (b) of this section by reason
of an uninsured loss which is uninsured
(as to hazard or amount) by reason of
a waiver by the Administrator as pro­
vided in paragraph (a) of this section.
(d) All insurance effected on the mort­
gaged property shall contain appropriate
provisions for payment to the “ creditor,”
(or trustee, or other appropriate person
for the benefit of the “ creditor” ) , of any
loss payable thereunder. If by reason
of the “ creditor’s” failure to require such
loss payable provision in the insurance
policy, payment is not made to the
“ mortgagee” the liability on the guaranty
nevertheless shall be reduced as pro­
vided in paragraph (b) of this section

5
with respect to an uninsured loss, except
to the extent that the liability under the
policy was discharged by restoring the
damaged property, by the insurer, or out
of payments thereunder to the insured,
or otherwise. No waiver pursuant to
paragraph (a) of this section shall mod­
ify this paragraph.
(e) Upon the “ creditor” (or trustee or
other person) collecting the proceeds of
any insurance contract, or other sum
from any source by reason of loss of or
damage to the “ mortgaged” property,
he shall be obligated to account for same,
by applying it on the indebtedness, or
by restoring the property to the extent
the expenditure of such proceeds will
permit. As to any portion of such pro­
ceeds the “ mortgagee” is not entitled to
retain for credit on such indebtedness or
by reason of other legal right, he shall
hold and be obligated to pay over the
same as trustee for the United States and
for the debtor, as their respective in­
terests may appear.
(f) Nothing in these regulations shall
operate to prevent the veteran from pro­
curing acceptable insurance through any
authorized insurance agent or broker he
selects. In all cases the insurance carrier
shall be one licensed to do such business
in the State wherein the property is
situated.
§ 36.4116 Loan charges, (a) In the
case of a purchase of real or personal
property by the veteran and a guaranty
pursuant to the act and these regulations
of an indebtedness representing part of
the purchase price, there may be charged
to the veteran and included in said note
amounts actually paid or incurred by the
seller (“ mortgagee” ) for such expenses
and charges as are chargeable to such
purchaser in accord with local custom, if
the purchaser so agrees, such as fees for
appraisals, credit and character report
on the veteran, surveys, fees of pur­
chaser’s (not seller’s) attorney, record­
ing fees for recording the deed and the
“ mortgage” only, premiums on fire and
other hazard insurance that may be re­
quired in accordance with these regu­
lations.
(b) In the case of a loan to the veteran,
charges in accord with local custom,
such as fees for appraisals, credit and
character report, surveys, abstract, or
title search, curative work and instru­
ments, attorney fees, fees for tax cer­
tificates showing all taxes paid, pre­
miums on fire and other hazard insur­
ance that may be required in accordance
with these regulations, revenue stamps,
recording fees, etc., all limited to
amounts actually paid or incurred by the
lender, may be charged to the borrower
and withheld from the gross amount of
the loan.
(c) Any unreasonable charges shall
be ground for denying an application for
guaranty.
No brokerage or other
charges shall be made against the vet­
eran for obtaining any loan guaranty
under this title.
§ 36.4117 Interest, (a) The rate of
interest chargeable on a loan guaranteed
fully or in part, shall not exceed 4 per
centum per annum on unpaid principal
balances. Interest may be computed
in accordance with standard amortiza­
tion practices.

(b)
The rate of interest on a second­
ary loan which is guaranteed pursuant
to section 505 of the act may exceed by
not more than 1% per annum the rate
charged on the principal loan, but in no
event shall the rate on the secondary
loan exceed 4% per annum.
§ 36.4118 Advances, (a) Nothing
herein shall prevent the creditor from
making advances for the benefit of the
mortgagor to pay taxes, assessments and.
insurance premiums as they become due,
and the cost of emergency repairs needed
to protect the property. The amount
guaranteed by the Administrator shall be
increased pro rata with all such in­
creases in the unpaid principal balance
of the loan: Provided, (1) That the an­
nual interest rate on all advances shall
not exceed 4 per centum per annum; (2)
that the terms of repayment shall not
extend the date of the amortization of
the loan and (3) that the amount of the
guaranty shall in no event exceed the
original amount thereof, nor exceed the
percentage of the indebtedness origi­
nally guaranteed.
(b) In the case of any advance made
by a creditor to a debtor, the creditor
with the consent of the debtor may ap­
ply any and all payments made by the
debtor for a period of twelve months to
the liquidation of the advance without
considering the original loan in default.
This shall not be construed to extend
the period of indulgence contemplated by
§§ 36.4134 and 36.4135.
§ 36.4119 Construction loans. Under
certain circumstances loans relating to
new construction may be guaranteed
pursuant to the act. (See § 36.4132.)
GUARANTY B Y THE ADMINISTRATOR

§ 36.4120 Limits. In no event will the
aggregate obligations of the United States
as guarantor under Title III exceed
$2,000 in respect to one veteran, whether
there be one or several loans, and
whether some are obtained for the ac­
quisition of a home, others for a farm,
and others for business, or equipment, or
other purposes. Repayment of a loan or
loans in whole or in part, or transfer of
the encumbered property does not modify
or enlarge such limitation. The guar­
anty shall not at any time exceed 50 per
centum of the aggregate of the indebted­
ness for any of the purposes specified in
sections 501, 502 and 503 of the act.
§ 36.4121 Second loan under section 505
(a). Section 505 (a) of the act provides
that when the principal loan for any of
the purposes stated in sections 501, 502 or
503 is “ approved by a Federal agency to
be made or guaranteed or insured by it
pursuant to applicable law and regula­
tions, and the veteran is in need of a sec­
ond loan to cover the remainder of the
purchase price or cost, or a part thereof” ,
the Administrator may guarantee the full
amount of the second loan, Provided:
(a) It does not exceed 20 per centum
of the purchase price or cost.
(b) The amount guaranteed together
with all other guarantees under Title III
for the same veteran does not exceed
$ 2, 000.

(c) The loan conforms to all other
applicable requirements of these regula­
tions.

§ 36.4122 Two or more eligible vet­
erans or borrowers, (a) In the absence
of a statement to the contrary, an appli­
cation signed by two or more eligible vet­
erans shall be conclusively presumed to
be an application by each for the guar­
anty of an equal proportionate part of
the entire amount to be guaranteed: Pro­
vided, however, That if husband and wife
execute the application, both being eli­
gible veterans, it will be conclusively pre­
sumed in the absence of a contrary state­
ment in the application that it is an
application for guaranty on behalf of the
husband only, unless the amount of the
guaranty then available to the husband
is insufficient to meet the requirement of
the case for guaranty of a proper amount
under these regulations and the terms of
the application; in which event the defi­
ciency may be charged against the
amount available to the wife, unless she
has in the application or otherwise (be­
fore approval) stated in writing her un­
willingness to be so charged.
(b)
The Administrator will not require
a wife to sign an application made by her
husband. If she also is an eligible vet­
eran and desires to exercise her right as
such to obtain a guaranty, a separate
application by her will be required. Sig­
nature of her husband to indicate his pro
forma joinder will be required only when
the wife is resident of, or the applica­
tion is signed in, or the property to be
encumbered is situated in, a State under
the laws of which such contract cannot
be legally executed by a married woman
alone as in the case of an unmarried
woman.
§ 36.4123 Maximum liability where
there are two or more veterans, (a) For
the purpose of determining the maxi­
mum amount of the potential liability
of the United States under a guaranty
incident to an obligation on which two
or more eligible veterans who applied for
the guaranty are liable, the obligation
will be deemed a several, and not a joint,
obligation of the respective applicants
who were charged with the guaranty or
a part thereof notwithstanding that as
among the debtors or any of them, and
as between them, or any of them, and
the creditor, the obligation is in fact
and law a joint obligation or a joint and
several obligation.
(b) In no event will the amount of
any veteran’s debt thereunder be deemed
to exceed for guaranty purposes the
amount for which each veteran is legally
liable to the holder of the obligation,
nor the value of the interest of the vet­
eran in the property. If more than one
of the obligors is an eligible veteran and
application by him or them is granted,
the maximum aggregate amount of the
guarantees will be the sum of the
amounts available to each applying vet­
eran but in no event will the aggregate
of the guarantees for more than one
veteran exceed 50 per centum of the
total loan except as provided under sec­
tion 505 of the act.
(c) For the purpose of § 36.4123 the
wife of a principal obligor shall not be
counted unless (1) she is legally liable
on the obligation under the law of the
jurisdiction where she executed it, and
(2) if she is a veteran she be properly

6
original appraisal report and shall state
or personal, to be purchased, repaired,
that the application for guaranty has
altered, or improved.
(g)
If the guaranty is applied for in been denied and the reasons therefor.
§ 36.4124 Veteran’s application, (a)
He shall send a copy of the letter to the
connection with the acquisition of, or
To apply for a guaranteed loan the
veteran and the Agency. Upon denial
a loan upon livestock, equipment, ma­
veteran and the prospective lender shall
any expenses incurred by the lender or
chinery, or implements, the agency shall
complete and sign in duplicate Form
the borrower shall be borne by them or
upon inspection or evidence and review
1822, Application for Farm Loan Guar­
either of them as they shall have agreed.
of the application report its opinion as
anty. Before or after preparing the ap­
(b) (1) The veteran and the proposed
to the reasonable normal value of such
plication, and before submitting it, the
lender, or either, may appeal to the Ad­
property, and its recommendation as to
lender and the veteran will address a the guaranty. Such report shall con­
ministrator for review of a denial of the
joint inquiry to the nearest office of the
application.
stitute an appraisal.
Veterans Administration on Form 1800,
(2)
Such appeal may be by letter, or
Certification of Eligibility, or otherwise.
§ 36.4125 Papers required. The pros­
on any prescribed form, and shall be
In addition to the necessary identifying
pective lender shall submit to the agency
mailed or delivered to central office of
information, they will state whether the
the following papers:
the Veterans Administration within one
property to be encumbered is real or
(a) Certification of eligibility (see
month after receipt of notice of denial.
personal, or both, the State and county
§ 36.4124 (a )).
(c) (1) If for any reason the loan
in which it is situated, and the nearest
(b) Loan Guaranty Certificate (Form
transaction is not concluded and the
highway. The Administrator will reply
1821 attached to application).
same or another lender thereafter wishes
on said Form 1800 or otherwise, stating
(c) Original application for guaranty
to consider making a loan on the same
the name and address of an approved
signed by prospective lender and bor­
security described in the original appli­
appraiser of realty, and in the case of
rower (see § 36.4124 (a )).
cation, a supplemental application, if
personal property, the person or per­
(d) The credit report, if required.
the same lender, or a new application if
sons to function as such.
(See § 36.4124 (b) and (d ).)
a different lender, may be submitted. If
(b) If instructed by the Administrator
(e) The original appraisal report,
accompanying it is a statement by the
so to do, on Form 1800, Certification of
Form 1833. (See § 36.4124 ( c ) , (f) and
borrower and lender that the condition
Eligibility, or otherwise, the creditor will
(g ) .)
of the security is substantially the same
secure a credit report. If not so in­
(f) Copy of purchase option, if any;
as when the appraisal report was made,
structed such report will not be required
and copy of conditional sales agreement
the supplemental or new application may
by the Veterans Administration. (See
if loan is to be predicated on such an
be approved without a new appraisal, if
paragraph (d) of this section.)
instrument.
the supplemental or new application
(g) Proposed loan closing statement of
(c) If the proposed loan is for repairs,
shall have been received by the Admin­
the estimated amounts to be disbursed
alterations or improvements to realty
istrator within three months from the
by the lender for the account of the
the appraisal report shall reflect an ex­
date of the appraisal report.
borrower (see Form 1806).
amination of the building contract, and
(2) Without reference to the time limit
(h) Unless stated in the mortgage, or
the plans and specifications, if any, and
stated in subparagraph (1) hereof, a
otherwise in the papers submitted, a
shall include appropriate data sufficient
copy of the appraisal report will be sup­
statement of the kinds and amounts of
to afford a basis for estimating the in­
plied without cost to a prospective new
insurance to be required to protect the
creased value of the farm to result from
lender or to the original proposed lender
such repairs, alterations or improve­
mortgagor, the lender and the Adminisat the currently prescribed price for a
tratoi* against loss by fire and other
ments: Provided, however, That ,if the
copy.
cost of such repairs, alterations and im­
hazards, and the estimated premium cost
§ 36.4128 Execution and form of
provements does not exceed $500 the ap­
thereof. (See § 36.4115.)
guaranty, (a) If the Administrator ap­
praisal requirements of these regulations
(i) When applicable, the original and
proves the application he shall notify
will be met by an appraisal report by the
copy (both signed) of Form 1862, Ap­
the Agency and the veteran thereof.
plication to Amend Loan Guaranty Cer­
agency, and no plans or detailed specifi­
For the purpose of evidencing the con­
tificate. (See § 36.4131 (c) and ( d ).)
cations will be required as a condition to
tract of guaranty, he shall execute a
a guaranty otherwise proper. Such ap­
§ 36.4126 Recommendation for ap­
Loan Guaranty Certificate, to become
praisal report may be abbreviated and
proval of guaranty. The Agency shall
effective upon the conditions therein
consist of bill of material, estimate of
review the papers to determine whether
stated. It shall be in substantially the
labor cost, general description of the work
it will recommend approval of the ap­
form following:
to be done, and opinion of the agency as
plication for guaranty. Thereupon the
Finance Form 1321
to reasonable normal value, and the
Agency shall forward all the papers to
Nov. 1944
enhancement of the value of the prop­
the appropriate office of the Administra­
U nited S tates op A merica
erty.
tor with recommendation that (a) the
(d) The veteran, the lender, and the
L oan G uaranty C ertificate I ssued by Vet­
Administrator approve the application,
erans ’ A dministration
appraiser shall be entitled, before or dur­
or (b) he disapprove it. If disapproval is
State___________________________________ ing the preparation of the application
recommended the reasons therefor shall
(Where property is located)
and other papers preliminary to a loan
be stated in writing at the time the
Number L .F ._____________________________
or purchase, to consult with the agency.
(To be filled in by V. A.)
papers are forwarded. A recommenda­
(e) In every case the appraiser’s retion that the application be approved,
•port shall indicate the basis, by survey
(Lender)
(Exactly as Payee’s name will ap­
shall be appropriately endorsed on the
pear on note)
oi otherwise, of identifying the real prop­
original o f the application. If more than
erty appraised as that to be encumbered
one person functions as or for the Agency
(Borrower-Veteran) (Exactly as to be signed
to secure the proposed loan.
in making such recommendation each
on note and mortgage)
(f) If (1) the loan does not exceed
such person shall sign the recommenda­
$500, (2) the lender does not require a
(House or Box Number—R.F.D. or Street—
tion made, indicating concurrence or dis­
mortgage, and (3) the loan otherwise
Post Office—County)
sent. In case any such person fails to
complied with these regulations, the pro­
participate in the decision or is absent,
(State)
visions of paragraphs (b), (c) and (e)
the appropriate fact and name of such
of this section: paragraphs (d ), (e) and
person shall be noted on the recom­
(House
or
Box
Number—Street—Post
office—
(h) of § 36.4125; paragraphs (a ), tc) and mendation.
County)
(d) of § 36,4130; subparagraphs (2) and
§ 36.4127 Administrator’s action on
(3) of paragraph (a) of § 36.4131; and
(State)
application, (a) Upon receipt of the
paragraphs (c) and (e) of § 36.4132 shall
I
papers from the Agency, the Adminis­
be inapplicable to such loan and any
A.
This
certificate
shall become effective
trator
will
determine
whether
to
approve
guaranty thereof: Provided, however,
the application. If disapproved he shall. when the requirements of the statute and
That in every such case there shall be
regulations have been complied with and the
return to the proposed lender all papers
submitted with the application a report
acts certified in Part III hereof have been
by the agency as to the reasonable nor­
received from the lender except the orig­
accomplished in compliance with said re­
quirements.
mal value of the work, or property, real
inal application for guaranty and the
chargeable with a part or all of the
guaranty as provided in § 36.4122.

7
B.
When it becomes effective as herein­ B. The undersigned lender warrants that
(1) the same “ mortgage,” duly executed and
above prescribed, this certificate shall obli­
witnessed, acknowledged, or proved as re­
gate the United States of America to pay to
quired by law, was properly filed, or filed for
the legal holder of the “note” described on
record, if and as provided by law on the
the reverse hereof upon his duly filing claim
_______ day o f ______ , 19____; a t ------------M;
therefor:
1. All or such portion of the maximum
and was given file No______ by the Recorder
of other proper official; (2) that it covers the
amount hereby guaranteed as becomes pay­
property described on the reverse hereof,
able upon the conditions, at the times stated
which is the same property described, or
in, and in accordance with the provisions
otherwise identified, or referred to, in the
of the Servicemen’s Readjustment Act of
above-mentioned application for guaranty
1944 (38 U. S. Code 693; 58 Stat. 284), and
and in this loan guaranty certificate, or in
the regulations issued pursuant thereto which
are in effect on the date of this certificate.
the application to amend loan guaranty certi­
In no event, will the obligation under this
ficate, if any, applicable to such loan; (3)
certificate exceed $2,000. Subject to the fore­
that no lien superior to said “mortgage” - has
going, this guaranty is f o r _____ per centum
intervened since the date of said application;
of the principal amount of said “note” , but
and (4) if the approved application for guar­
not for more than $____________ In no
anty related to a loan wholly or partly to be
event will it exceed said percentage of the
secured by a hypothecation or a pledge of
principal amount.
personal property, such hypothecation or
2. At the expiration of 1 year from the date
pledge has become effective by appropriate
of the “note”, an amount equal to the in­
delivery to the lender and no superior lien has
terest for 1 year at the contract rate on that
intervened since date of application.
portion of the indebtedness (“note” ) origi­
(If a corporation)
(All signatures must be
nally guaranteed hereby, such payment to be
in ink)
credited on the indebtedness as prescribed
Mr.
by said regulations.
Mrs.
C.
Executed on behalf of the United States ------------------------- M iss________________
of America by the Administrator of Veterans’
(Secretary)
(Lender (s))
Affairs, through the undersigned authorized
B y --------------------------agent on this date, to become effective in
the manner hereinabove prescribed.
Title (president, vice
Dated___________________
president, etc.)
Mr.
A dministrator of V eterans’
Mrs.
Affairs
Miss _______________
B y ---------------------- ---------------Mr.
(Authorized Agent)
Mrs.
A t _________________________
Miss _______________
(Post Office)
(Borrower (s ))
No te : If loan is not closed the proposed
N ote 1. If the note is unsecured, refer­
lender, or when paid the holder of the note
ences to “mortgage” in paragraph “A” and
will mark this certificate “ Cancelled” , sign
“B” above are inapplicable. (See Regula­
thereunder and return the Veterans’ Admin­
tions, § 36.4108, Par. ( c ) .)
istration.
Note 2. If the local law provides for filing
II
only, not recording, chattel mortgages or
similar instruments paragraph “B” above
Description of property to be “Mortgaged”
nevertheless is to be completed. It refers
(Lot and block, section and township, land
not only to the County Recorder or Clerk,
lot and Land District, etc., and surveyor’s
but also the State Commissioner of Motor
field notes where appropriate and any other
Vehicles or other officials who keep motor
language proper to complete description.
vehicle mortgage records, and to other sim­
Include description of personal property, (if
ilar officials, State or County.
(See
any). Describe fully: show serial numbers,
§ 36.4133 of Regulations.)
if available, or any other means of identi­
fication.
§ 36.4129 Disposition of papers. The
original application for guaranty and
Premises identified as--------------------------------the appraisal report will be retained in
(Name of farm, if any, and R. F. D. also
number or name of nearest highway)
the files of the Veterans Administration.
(City, Town, Village)
(County, Parish)
(State, District, Territory)
and further described as:-------------(If more space is needed, detach and con­
tinue description on reverse)
III
Certification by B orrower and Lender

A. We hereby warrant that (1) the under­
signed borrower named on the reverse hereof
executed the note, the face amount of which
is $___ consisting of $________ principal and
$__ _ interest as defined in the Regulations;
(2) it is dated_______ day o f ________ 19____ ;
(3) borrower(s) and mortgagor(s) delivered
it together with the “mortgage” (as defined
in the regulations) bearing the same date,
and executed to secure payment of said note;
(4) said note and mortgage are in the form
and type contemplated in the application of
the undersigned pursuant to which this loan
^ guaranty certificate was issued; and (5) the
principal stated above has been paid to, or
according to the directions ofr the under­
signed borrower (s).

The Loan Guaranty Certificate and all
other papers will be forwarded to the
proposed lender with instructions as to
closing the loan in a manner to make
the guaranty effective.
§ 36.4130 Loan procedure after ap­
proval of guaranty. Upon receipt of the
papers from the Administrator, the
lender shall:
(a) Satisfy himself by “ title certifi­
cate” , as defined in these regulations,
as to the title to the real estate to be
encumbered (§ 36.4100 (p )) , and sat­
isfy himself in such reasonable manner
as may be available as to the title to
personal property to be encumbered.
(b) Cause all necessary instruments
to be properly signed and those to be
filed, or filed and recorded, properly
witnessed, acknowledged or proved so
as to entitle them to filing or recordation.
(c) Disburse all funds in substantial
accord with th e .proposed loan closing
statement submitted with the applica­
tion. (See § 36.4125 (g) and Form 1806
or 1861.)
(d) File with the proper State, County
or other public official to be retained

where required, or recorded and returned,
the “ mortgage” , and any other appro­
priate instrument which under the law
of the State is required or permitted to
be filed or recorded for the- purpose of
establishing a valid lien as between the
parties, or third persons, or of giving
actual or constructive notice of the
“ mortgage,” pledge, hypothecation, or
other transaction.
(e)
Take possession or do any other
necessary act to make effective the
pledge, or hypothecation, if any.
§ 36.4131 Report of closing loan.
(a) Within two months after closing the
loan and filing with appropriate public
official of the proper instruments, or the
taking of other appropriate steps, if any,
to make the lien effective, the lender
shall complete and forward to the Ad­
ministrator (using prescribed form, if
available) a properly signed report of
closing the loan stating that:
(1) The disbursement of the amount
named in such report as the principal
of the note has been completed by the
lender, which amount may be not more
than 3% in excess of the amount of the
proposed loan as stated in the original
application for guaranty, without com ­
plying with the procedure stated in para­
graphs (c) and (d) of this section.
(2) Such disbursements were as esti­
mated on the loan closing statement sub­
mitted with the application, except as
otherwise stated on the reverse side
of the report of closing loan.
(See
§§ 36.4116 (a) and 36.4125 (g) and Form
1806 or 1861.)
(3) The note and the mortgage (or
other security instrument) were prop­
erly executed, stating the date, and the
latter was duly acknowledged, witnessed,
or proved, so that it was legally eligible
for filing and in which it was properly
filed and the filing number thereof; or in
the case of a pledge, or hypothecation the
necessary possession, or other steps were
taken to make same effective.
(4) The note was dated (stating the
date thereon) and signed by the debt­
or” ; the actual principal amount thereof;
and the rate of interest provided therein.
(5) The Loan Guaranty Certificate
(stating its L-Number) was completed,
and appropriately signed by the lender
and the borrower as therein provided.
(b) If the lender is a corporation, its
corporate seal shall be impressed on such
report.
(c) If the transaction to be closed is
essentially the same as indicated in the
original application except that:
(1) The amount of the loan actually
to be made is more than 103% of the
amount stated in the application, or
(2) Personal property to be acquired
differs from that described but is for the
same use or purpose, and substantially
similar in kind, quality and value.
Form 1862, Application to Amend Loan
Guaranty Certificate, will be completed
and signed in duplicate.
(d) The lender will forward the origi­
nal and copy of Form 1862, Application
to Amend Loan Guaranty Certificate, to
the “ Agency,” which will recommend ap­
proval or disapproval and forward both
to the Veterans Administration office
which issued the Loan Guaranty Certifi­
cate. Such office will determine whether

8
to approve the Application to Amend
Loan Guaranty Certificate. Such deter­
mination will be based on the original
application, the evidence submitted in or
with the original application, the appli­
cation to amend, the recommendation of
the Agency, and such other evidence, if
any, as it considers necessary. Notice
of action will be given as in the case of
original applications. If approved such
approval will be appropriately indicated
on the original, and such original, duly
executed by the Veterans Administration
will be forwarded to the lender. It may
be attached to the original Loan Guar­
anty Certificate to evidence amendment
thereof as reflected by such “ rider.”
§ 36.4132
Construction loans, (a)
Upon the submission to an Agency of an
application made pursuant to section 502
of the Act for the guaranty of a loan for
construction on a farm owned by the
veteran, or for repairs, alterations or
improvements thereon (hereinafter col­
lectively referred to as “ construction
loans” ) the guaranty will be issued to
become effective only upon completion
thereof, and upon fulfillment of the same
requirements of these regulations as are
applicable to the guaranty of loans for
the acquisition of residential or non-residential farm buildings other than by
construction.
(b) Notwithstanding the provisions of
paragraph (a) of this section, the guar­
anty mentioned therein may become e f­
fective without the entire amount of the
loan having been disbursed if:
(1) Complete disbursement is pre­
vented, in the exercise of ordinary care,
by reason of the filing of mechanics’ liens
or other liens, or other controversy or
threat of litigation, as to entitlement to
any part of the proceeds of such loans;
and
(2) There is paid to an escrow agent
approved by the Administrator so much
of such proceeds as have not been dis­
bursed, or other arrangements satis­
factory to the Administrator have been
made for assuring the availability of such
sums; and
(3) There is issued by the Adminis­
trator Form 1863, Approval of Escrow
Certificate, which may be attached to the
Loan Guaranty Certificate.
(c) For construction loans the lender
will follow the procedure provided in
§§ 36.4124 to 36.4131, inclusive, for the
guaranty of loans for the purchase of
farms, and in addition will furnish to
the Agency:
(1) Complete plans and specifications,
except as provided in § 36.4124 ( c ) .
When complete plans and specifications
are not required the data mentioned in
said paragraph (c) will be supplied un­
less § 36.4124 (g) is applicable, in which
event the requirements will be those
stated therein. •
(2) An estimate, prepared by a quali­
fied appraiser, of the normal agricultural
value of the property on which the im­
provements will be situated together with
a separate estimate of the increased value
of the property which will result from
the improvements according to the plans
and specifications or other data. (See
§ 36.4124 (c ).) Such estimates of value
are in addition to the appraiser’s report,
otherwise required;

(3)
A copy of the agreement or agree­ erty is situated at the time the loan is
closed.
ments (which may be unsigned) on
(c) Failure of the mortgagee to com­
which the proceeds of the proposed loan
ply with § 36.4115 with respect to insur­
will be disbursed.
ance,
(d) Upon the receipt of such papers
(d) A tax sale pursuant to execution,
the Agency will follow the procedure pre­
scribed in § 36.412S and submit same to
or otherwise as provided by law, oc­
casioned by nonpayment of taxes accru­
the Administrator for action as pre­
ing against the mortgaged property after
scribed in §§ 36.4127 and 36.4128.
the date of the “ mortgage” if “ mort­
(e) The Loan Guaranty Certificate
gagee” fails to give notice to the Admin­
shall become effective only upon the con­
istrator of the delinquent taxes at least
ditions stated in § 36.4130 and in addi­
one month before such sale.,
tion the further condition that there be
supplied to the Administrator a state­
(e) A release by the creditor of the
ment by an appraiser on Form 1803 (a ),
lien on any of the real or personal prop­
Statement by Appraiser on Completion
erty securing the guaranteed loan, or
of New Construction. It shall recite
any part thereof unless the Administra­
that:
tor consents in writing. Such consent
(1) He has inspected the construction,
may be granted if the debt is appropri­
repairs, alterations, or improvements.
ately reduced or on such other terms as
(2) The same have been constructed
the Administrator may determine: Pro­
and completed in substantial conformity
vided however, That if the land is sought
with the contract, the plans and speci­
by a public authority for highway or
fication, (if any), and any authorized
other purposes, consent is hereby given
changes therein (if any), permitted by
for the creditor to release without con­
these regulations, or, in those cases em­
sideration or for such consideration as
braced in § 36.4124 (c) or § 36.4124 ( f )
he deems proper and without reference
there are no plans and specifications,
to the Administrator, the creditor’s lien
within good building practices.
on land without any buildings thereon
(3) The increased value o f the prop­
if the land so released does not
erty as completed and which will be en­
exceed five percent of the acreage
cumbered is substantially in accord with
encumbered and does not exceed
his estimate.
$200 in value. The same consent is
(f) During the course of construction
hereby given when the release, easement
the Administrator shall be entitled at
grant, or other instrument is sought by
his expense, to cause such inspection of
a public or private agency, or person,
the construction work at such time or
for the purpose of pipe line, telephone,
times as he may determine.
telegraph or electric transmission lines:
-(g) Upon compliance with the require­
Provided, however, That when such re­
ments of this section and of §§ 36.4130
leases, or grants by the lender for any
and 36.4131 relating to the guaranty be­
one or more of the purposes stated in
coming effective in other than construc­
this paragraph, or otherwise, with or
tion loan cases, said Loan Guaranty Cer­
without specific consent by the Admin­
tificate shall become effective as origi­
istrator, shall have decreased the securi­
nally executed (and subject to § 36.4131),
ty as much as five percent in acreage, or
or as amended pursuant to approval of
$200 in value, no further releases shall
application therefor on Form 1862, Ap­
be executed, without consent of the Ad­
plication to Amend Loan Guaranty Cer­
ministrator. If release of lien is exe­
tificate. (See § 36.4131 (c) ( d ) .)
cuted contrary to the provisions of these
(h) The borrower and lender may con­
regulations the amount of the guaranty
tract for the payment to the lender of
will be reduced proportionately in the
a reasonable sum for the advance of
same manner as if the value of the re­
funds during the construction and super­
leased property were applied as a credit
vision or inspection of the construction.
on the unpaid balance of the loan. The
(i) Minor changes may be made in the
provisions of this paragraph will not be
plans and specifications or substitution
construed to affect the guaranty in the
of material of substantially equal quality
event of any grant of title or easement
or value, as the creditor, the debtor, and
that leaves unaffected the lien on the
the builder (contractor) may agree if
property affected thereby; or
same are not of a major character and
(f) Sale by reason of foreclosure of
in the aggregate do not increase or de­
a superior lien if the holder of the guar­
crease the cost more than five per centum
anteed loan secured by a subordinate
of the contract price. This does not
lien has knowledge of such foreclosure
modify the provisions of § 36.4131.
sale as much as 10 days prior thereto and
Changes or substitutions other than as
fails to notify the Administrator of the
herein stated must have the approval of
time and place thereof.
the Administrator.
CLAIM UNDER A G U ARAN TY.
§ 36.4133 When guaranty does not
apply. The guaranty shall not cover any
§ 38.4134 Default, (a) In the event
loss sustained by the creditor as the
of default, not cured, continuing three
result of:
months on an amortized loan or one
(a) The acceptance by the mortgagee
month on a term loan the “ creditor”
of a “ mortgage” on any real or personal
may elect to assert claim under the
property, title to which is not merchant­
guaranty, and give notice thereof to the
able;
Administrator.
(b) Failure of the mortgagee to pro­
(b) If any default occasioned by fail­
cure a duly recorded lien of the dignity
ure seasonably to pay to the “ creditor”
required by these regulations; or a lien
entitled any amount of principal or in­
of such dignity by filing, without record­
terest due him under the contract (not
ing, if lawful, or by pledge or otherwise
cured) shall have persisted as long as
as required or permitted by applicable
six months the holder of the indebted­
lav/ in the jurisdiction where the prop­
ness shall give, notice thereof to the Ad­

9
ministrator notwithstanding the failure
results from payments on “ advances” as
provided in § 36.4118 or from any indul­
gence of the debtor as provided in
§§ 36.4135 and 36.4141.
(c)
(1) The notice shall state the loan
guaranty number if available. If not
available other identifying data shall be
included, such as date and amount of
original obligation, location of Veterans’
Administration office that issued the
guaranty and the property encumbered.
(2) In all cases the notice shall state
the name and last known address of the
debtor, of the veteran, and of the credi­
tor, and the date and manner of default,
and amount past due. If he desires, the
creditor may also state his views as to
any indulgence that should be extended.
(3) The notice to the Administrator
shall be mailed by registered mail or
personally delivered in exchange for a
written receipt within one month after
the expiration of said six months’ period.
§ 36.4135 Claim' on notice of default.
(a) In the notice of default, or sepa­
rately, then, or later, the creditor may
make claim under the guaranty.
(b) Then or thereafter the creditor
may also give notice of his intention to
foreclose the lien or liens securing the
indebtedness.
(c) The Administrator may approve
the creditor’s request, if any, to postpone
action to press his claim against ' the
mortgagor, or the property. Such post­
ponement with the consent of the Ad­
ministrator, shall not operate to void or
diminish the ultimate liability under the
guaranty. In no event shall indulgence
or postponement of action authorized by
these regulations impair any right of the
creditor to thereafter proceed within the
applicable statute of limitations period
as if there had been no indulgence or
postponement.
§ 36.4136 Legal action, (a) The cred­
itor shall not begin action in court or give
notice of sale under a power of sale,
until the expiration of 30 days after
receipt by the Administrator of the no­
tice of intention to foreclose. Notwith­
standing paragraph (a) of § 36.4134 such
notice may be given at any time after
default.
(b) (1) If the circumstances require
immediate action to protect the interest
of the creditor or the Administrator, the
Administrator may waive the require­
ment for prior notice if notice of the
action taken is immediately given.
(2) Without limiting the foregoing,
the existence of conditions justifying the
appointment of a Receiver for the prop­
erty shall be sufficient excuse for begin­
ning suit without prior notice to the Ad­
ministrator if within ten days after com ­
mencement of the suit or action, plain­
tiff gives the Administrator notice
thereof.
§ 36.4137 Notice of suit and subse­
quent sale, (a) Within ten days after
beginning suit or causing notice of sale
without suit to be given, the creditor
shall notify the Administrator thereof
by registered mail, or by personal deliv­
ery of notice in exchange for written
receipt. The notice shall state whether
the foreclosure will be by proceeding in
court, or under a power of sale; the style

and number of the suit, if any, and the
name and location of the court in which
pending.
(b) The creditor shall give written
notice to the Administrator by registered
mail (or delivery) of any foreclosure
sale, judicial, or under a power of sale;
or of any proposed termination of the
rights of any vendee or his immediate or
remote guarantee (assignee) pursuant to
any power or option in a sales contract,
or in any other instrument affecting the
property which constitutes any security
for the obligation guaranteed. Such no­
tice shall be given so that it is received
at least thirty days before such sale or
other proposed action. It shall state the
date, hour and place thereof. The Ad­
ministrator may bid thereat on the same
terms as the lender or other bidders, and
may exercise any right the debtor could
exercise by virtue of the contract, or any
statute, or otherwise. This section is
applicable whether the suit, or the sale,
or termination, occur before or after
payment of the guaranty.
§ 36.4138 Death of veteran or other
owner, (a) In the event the creditor has
knowledge o f the death of the veteran
or of any owner of an interest in the
encumbered property, or the death of
any other person liable on the indebted­
ness which is guaranteed in whole or in
part, the creditor shall take such steps,
if any, as are legally necessary, and rea­
sonably available, in the jurisdiction
where the encumbered property is situ­
ated, to avoid loss of the lien, or im­
pairment thereof, or of all or part of
the proceeds of any sale of the property
as a result of, or incident to, such death,
or of any probate proceedings thereby
occasioned in said jurisdiction.
(b) In addition to protecting the lien
rights as required by paragraph (a) of
this section, the creditor at his discretion
may proceed in probate, or otherwise, as
may be permissible and feasible, in any
jurisdiction where administration pro­
ceedings are pending or properly may be
instituted, or other appropriate legal ac­
tion taken, against assets or persons, to
assert any rights, by means of any reme­
dies, therein available to a similarly situ­
ated creditor of the decedent.
(c) Upon direction of the Adminis­
trator and his designation of an accessi­
ble attorney for the purpose, and making
appropriate provisions for advancing or
paying the costs and expenses o f the pro­
ceeding, the creditor shall proceed, as
provided in paragraph (b) of this sec­
tion: Provided, however, That in any
case the Administrator may, at his op­
tion, proceed immediately in respect to
protecting the lien, or asserting claim as
contemplated by paragraph (b) of this
section, or as to both remedies. If the
Administrator takes action, it may be
in his name or the name of the creditor
as the Administrator may elect and as
may be appropriate under applicable law.
If action is taken by the Administrator
he shall seasonably notify the creditor
thereof.
(d) Nothing in this section shall im­
pair any right of set-off or other right or
remedy of the Administrator.
§ 36.4139 Death or insolvency of
creditor, (a) Immediately upon the
death of the “ creditor” and without the

necessity of request or other action by
the debtor or the Administrator, all sums
then standing as a credit balance in a
“ trust,” or “ deposit,” or other account,
to cover taxes, insurance accruals, or
other items in connection with the loan
secured by the encumbered property,
whether stated to be such or otherwise
designated, and which have not been
credited on the “ note” shall, neverthe­
less, be treated as a set-off and shall be
deemed to have been credited thereon as
of the date of the last debit to such ac­
count, so that the unpaid balance of the
note as of that date will be reduced by
the amount of such credit balance: Pro­
vided, however, That any unpaid taxes,
insurance premiums, rents, or advances
may be paid by the holder of the in­
debtedness, at his option, and the
amount which otherwise would have
been deemed to have been credited on
the note reduced accordingly. This sec­
tion shall be applicable whether the
estate of the deceased creditor is solvent
or insolvent.
(b) The provisions of paragraph (a)
of this section shall also be applicable in
the event o f:
(1) Insolvency of creditor;
(2) Initiation of any bankruptcy or
reorganization, or liquidation proceed­
ings as to the creditor, whether voluntary
or involuntary;
(3) Appointment of a general or ancil­
lary receiver for the creditor’s property;
or, in any case
(4) Upon the written request of the
debtor if all accrued and due insurance
premiums, taxes, and rents have been
paid, and appropriate provisions made
for future accruals.
(c) Upon the occurrence of any of the
events enumerated in paragraph (a) or
(b) of this section interest on the note
and on the credit balance of the “ de­
posits” mentioned in paragraph (a) shall
be set-off against each other at the rate
payable on the principal of the note, as
of the date of last debit to the deposit
account. Any excess credit of interest
shall be treated as a set-off against the
unpaid “ advances” , if any, and the un­
paid balance of the note.
(d) The provisions of paragraphs (a),
(b) and (c) of this section shall apply
also to corporations. The dissolution
thereof by expiration o f charter, by for­
feiture, or otherwise, shall be. treated
as is the death of an individual as pro­
vided in paragraph (a).
§ 36.4140 Filing claim under guar­
anty. Claim under the guaranty may
be made on Form 1864, Claim under the
Guaranty. Subject to the limitation
that the total amount payable under the
guaranty shall in no event exceed the
original amount thereof, the amount
payable under the guaranty shall be the
percentage of the indebtedness originally
guaranteed applied to the indebtedness
(as defined in § 36.4100 (m )), computed
as of the date of the claim, and reduced
by any payments theretofore made by
the United States pursuant to the
guaranty.
§ 36.4141 Options available to Admin­
istrator. Upon receipt of claim under
the guaranty, or notice of intention to
foreclose, the Administrator shall have
the following options:

10
(a) Pay to the creditor not later than
one month after receipt of notice of any
default, as a partial payment of any
actual or potential claim under the
guaranty, the amount of principal, in­
terest, taxes, advances, or other items in
default; and in consideration of such
payment the lender shall be deemed to
have agreed to refrain from giving effect
to any acceleration provisions by reason
of defaults prior to the date of notice of
default theretofore given: Provided,how­
ever, That unless the creditor "consents,
the Administrator may exercise this op­
tion once only, and in an amount not
exceeding an amount equivalent to the
aggregate of principal and interest pay­
able in one year, or not exceeding ten
per centum of the original amount of
the guaranty, whichever sum is less.
(b) Pay the creditor within one month
after receipt of claim the full amount
payable under the guaranty without re­
quiring foreclosure, or personal action.
(c) Pay to the creditor promptly after
receipt of claim any amount agreed upon,
not exceeding the amount due under the
guaranty; and notify him to institute
appropriate foreclosure
proceedings,
with or without legal action to reduce
the debt to judgment, against all or any
of the parties liable thereon, and whose
names are stated in such notice to the
creditor.
(d) If the creditor does not begin ap­
propriate action within two months after
receipt of notice to institute action as
provided in paragraph (c) of this section,
the Administrator shall be entitled to be­
gin and prosecute the same to completion
in the name of the creditor, or of the Ad­
ministrator on behalf of the United
States, as may be appropriate under ap­
plicable laws and rules of procedure;
Provided, however, That in such event
the Administrator shall pay (in advance
if required under the practice in the
jurisdiction) all court costs, and other
expenses, and provide the legal services
required.
§ 36.4142 Refinancing and extension
of guaranty, (a) When the Administra­
tor shall have received notice from the
creditor that he intends to institute fore­
closure proceedings, the Administrator
shall be entitled to obtain a refinancing
which will prevent the consummation of
the foreclosure sale. Nothing herein
shall be construed to require a creditor
to lend money for such refinancing.
(b) If refinanced in any manner the
Administrator may continue in effect the
guaranty granted with respect to the
previous loan in such manner as to cover
the loan which affected the refinancing.
(c) The Administrator in appropriate
cases shall be entitled to exercise any re­
demption rights of a debtor, or a creditor,
in connection with the loan guaranteed
or property rights arising out of, or in­
cident to such loan.
§ 36.4143
Subrogation.
(a)
Any
amounts paid to the creditor by the Ad­
ministrator pursuant to the guaranty
shall constitute a debt due to the United
States by the veteran on whose applica­
tion the guaranty was made; and by his
estate upon his death. The Administra­

tor is subrogated to the contract and the
lien rights of the creditor to the extent
of such payments, but junior to the cred­
itor’s rights as against the debtor or the
encumbered property until the creditor
shall have received the full amount pay­
able under his contract with the debtor.
No partial or complete release by the
creditor of the debtor or of the lien shall
impair any rights of the Administrator,
by virtue of the lien, or otherwise.
(b) The creditor, upon request, shall
execute, acknowledge and deliver an ap­
propriate instrument tendered him for
that purpose, evidencing any payment
received from the Administrator and the
Administrator’s resulting right of subro­
gation.
§ 36.4144 Future action against mort­
gagor. In addition to the amount, if any,
collected from the proceeds of the en­
cumbered property by reason of the
right of subrogation, the United States
will collect from the veteran, or his
estate, by set-off against any amounts
otherwise payable to the veteran or his
estate; or in any other lawful manner,
any sums disbursed by the United States
on account of the claim pursuant to the
guaranty.
§ 36.4145 Suit by Administrator, (a)
Whenever pursuant to these regulations,
the Administrator institutes, or causes
to be instituted by the creditor, or oth­
erwise, any suit in equity; action at law;
or probate proceedings or the filing of
a claim in such; or other legal or equita­
ble proceedings of any character, or any
sale, in court or pursuant to any power
of sale, the person or persons properly
instituting the same (including the Ad­
ministrator) shall be entitled to recoup
from any proceeds realized therefrom
any expenses reasonably incurred, in­
cluding trustee fees, court costs, and
attorney fee paid (or the reasonable
value of the services of the trustee and of
the attorney, if performed by salaried
person or persons, or by the party him­
self, when proper).
(b) The net proceeds, after setting off
such items that may properly be
recouped, shall be credited to the indebt­
edness, or otherwise as may be proper
under the facts.
(c) In determining the propriety of
recoupment and the amount thereof
consideration shall be given to any provi­
sions in the “ note” or “ mortgage” relat­
ing to such items, and any amounts
actually realized pursuant thereto.
§ 36.4146 Creditor’s records and re­
ports required, (a) The creditor shall
maintain a record of the amounts of
payments received on the obligation and
disbursements chargeable thereto, and
the dates thereof. Any creditor who
fails to maintain such record shall be
presumed to have received on the dates
due all sums which by the terms of the
contract are payable prior to date of
claim for default, and the burden of go­
ing forward with evidence and of ulti­
mate proof of the contrary shall be on
such creditor; not on the debtor, or the
United States.
(b) On any delinquent loan the creditor
shall report annually on the anniversary

of the earliest unremedied default any
amount received or disbursed, the unpaid
balance of principal and accrued interest
and any other items chargeable; and the
nature of any defaults not already re­
ported. He shall include such additional
information, if reasonably necessary and
obtainable, which may from time to time
be requested by the Administrator.
(c) A proposed lender may be required
to submit evidence satisfactory to the
Administrator of his equipment for
maintenance of adequate records on,
and his ability to service, loans if guar­
anteed pursuant to the provisions of the
Act and these regulations.
§ 36.4147 Failure to supply informa­
tion. Failure to supply any available in­
formation required by these regulations
within two months after request there­
for will entitle the Administrator to ob­
tain such information otherwise, and the
expense of so obtaining it, plus ten dol­
lars to cover estimated overhead ex­
penses, shall be chargeable to the credi­
tor who failed to comply with such re­
quest.
§ 36.4148 Notice to Administrator.
Any notice required by these regulations
to be given the Administrator shall be
sufficient if in writing, and delivered at,
or mailed to, the Veterans Administra­
tion office at which the application for
guaranty was approved or to any
changed address of which the creditor
has been given notice or, at the option
of the creditor, to the central office of
the Veterans Administration, Washing­
ton 25, D. C. If mailed the notice shall
be by registered mail when so provided
by these regulations.
§ 36.4149 Right to inspect books.
The Administrator has the right to in­
spect, at a reasonable time and place
the papers and records pertaining to the
loan and guaranty. If permission to
inspect is declined the Administrator
may enforce the right by subpoena un­
der the provisions of Title HI of Pub­
lic No. 844, 74th Congress, 49 Stat.
2031-35, 38 U.S.C. 131, or in any ether
lawful manner.
§ 36.4150 Forms, construction to be
placed on references to. All references
in the regulations to Form 1800, Certifi­
cation of Eligibility, or to other form
numbers, shall be construed to include
any revision of the same forms, identi­
fied by the same, or by different numbers.
§ 36.4151 Disqualified lenders a n d
bidders. Except under unusual circum­
stances and upon prior approval by the
Administrator an application for guar­
anty of a loan will not be approved if
the lender is known to be an employee
of the Veterans Administration or of
the Agency; and without such approval,
an employee of either may not bid at a
foreclosure sale of the security for a
guaranteed loan.
[ seal]

F rank T. H ines ,

Administrator.
D ecember 8, 1944.
[F. R. Doc. 44-18638; Filed, Dec. 8, 19445
12:37 p. m.]

D. S . GOVERNMENT PRINTING O F F I C E : 1 0 4 4

UNITED

STATES

VETERANS

OF

AMERICA

ADM INISTRATION

GUARANTY OF LOANS
Regulations Under Title III
(PURCHASES OF BUSINESSES, ETC.)
SERVICEMEN’S READJUSTMENT ACT OF 1944
(Public Law 3 4 6 — 78th Congress)
(Chapter 2 6 8 — 2d Session)
(58 Statutes at Large 284)
(38 U. S. Code 6^3 et seq.)

(N O T E :

This pamphlet covers the subject of Guarantee of Loans for

the purchases of businesses, etc., pursuant to Section 503 of the A ct.
The subjects of Guaranty of H om e Loans and of Guaranty o f Loans
for the Acquisition of Farms and Farm Equipment have been printed
in separate pamphlets.

This pamphlet also includes changes in and

additions to the regulations under Title I I I governing the Guaranty
of Home Loans ( § § 36.4000 to 36.4049), and the Guaranty of Loans on
Farms and Farm Equipment (§ § 36.4100 to 36.4151).)

This publication may he procured from the
Superintendent of Documents, U. S. Government Printing Office,
Washington 25, D. C., at 5 cents per copy.

FOREW ORD

The Servicemen’s Readjustment Act of
1844 and these regulations constitute a
part of each contract of guaranty issued
by the Administrator of Veterans Af­
fairs on behalf of the United States of
America, pursuant to Title III of said
Act.
The officials and employees of the Vet­
erans Administration from time to time
assigned to duties in connection with the
administration of the Act shall act on
behalf of the Administrator of Veterans
Affairs, and when so acting within the
scope of authority delegated to them
shall for all purposes of the Act and
these regulations be deemed to be act­
ing for said Administrator.
Central Office of the Veterans Admin­
istration, Washington 25, D. C., is the
main office of the Administrator of Vet­
erans Affairs. The functions pursuant
to Title III of the Act will also be per­
formed in field offices of the Veterans
Administration from time to time desig­
nated for that purpose. Transactions
and communications with, and contracts
by such designated field offices shall have
the same effect as if with, or made by,
Central Office.
These regulations should be carefully
read. The completed application or

other papers submitted should be care­
fully examined by the applicants, (bor­
rowers and lenders) in order to be cer­
tain of accuracy and avoid any possible
embarrassment resulting from errors.
It will facilitate the service cf the Vet­
erans Administration to the veterans
and the lenders if, in correspondence,
reference is made to the appropriate
section numbers, if any, involved in the
subject of the correspondence.
In view of the large number of vet­
erans with the same or similar names, it
is important not only in correspondence,
but also in documents to use the veter­
an’s full first name instead of his initial
only, and also his middle initial. If un­
objectionable, it will be helpful to use his
full middle name. In addition to the full
name, ether available identifying data
should be used in correspondence, such
as serial number allocated to the veteran
while in active service, rank, and organi­
zation at date of discharge, current resi­
dence address, etc. In mortgages and
other documents it will be desirable to
use the service serial number in addi­
tion to the full name, although if there
is objection the number will not be re­
quired. If there has been a guaranty ap­

plication previously submitted by the
veteran and the number assigned thereto
by the Veterans Administration is
known, that number should be used in all
communications; and on all documents
pertaining to that application.
It should be clearly understood that
the Act does not authorize the Veterans
Administration or the Administrator of
Veterans Affairs to lend money to the
veteran under Title III; but only to
guarantee loans within the prescribed
limitations.
NOTICE
Federal statutes provide severe penal­
ties including forfeitures, fines and im­
prisonment, for fraud on the part of the
applicant and also as to “ any person who
shall knowingly make or cause to be
made, or conspire, combine, aid, or as­
sist in, agree to, arrange for, or in any
wise procure the making or presentation
of a false or fraudulent affidavit, decla­
ration, certificate, statement, voucher, or
paper, or writing purporting to be such”
concerning any application for the guar­
anty of a loan by the Administrator.
(38 U. S. C. A. 697, 715, 450, 451, 454 (a ),
556 (a ); 18 U. S. C. A,. 80.).

P art 36— R egulations U nder S ervice­
men ’ s R eadjustment A ct op 19441
GUARANTY OF LOANS ON PURCHASES OF
BU SIN ESSES, ETC.

The following regulations govern the
guaranty of loans on businesses, etc.,
under Title III of the Servicemen’s R e­
adjustment Act of 1944:
Sec.

36.4200 Definitions.
(a) Administrator.
(b) United States.
(c) State.
(d) Designated agency or agency.
1 (e) Federal agency.
(f) Guaranty.
(g) Mortgage.
(h) Secondary or junior loans.
(i) Guaranteed loan.
(j) (1) Business.
(2) Business loan.
(3) Business realty loan.
(4) Purchased .or to be purchased.
(k) Reasonable normal valuer
(l) (1) Land.
(2) Buildings.
(3) Personal property.
(4) Supplies.
(5) Equipment.
(m) Indebtedness.
(n) Note.
(o) Appraiser.
(p) Certificate of title.
(q) Credit report.
(r) Eligible veteran.
(s) Eligible lenders.
(t) Creditor.
(u) Debtor.
(v) Used or conducted by a veteran.
(w) Interest.
36.4201 Miscellaneous.

■

Sec.
36.4227 Administrator’s action on applica­
tion.
36.4228 Execution and form of guaranty.
36.4229 Disposition of papers.
36.4230 Loan procedure after approval of
guaranty.
36.4231 Report of closing loan.
36.4233 When guaranty does not apply.
claim under a guaranty

36.4234
36.4235
36.4236
36.4237
36.4238
36.4239
36.4240
36.4241
36.4242
36.4243
36.4244
36.4245
36.4246
36.4247
36.4248
36.4249
36.4250
36.4251

Default.
Claim on notice of default.
Legal action.
Notice of suit and subsequent sale.
Death of veteran or other owner.
Death or insolvency of creditor.
Filing claim under guaranty.
Options available to Administrator.
Refinancing and extension of guar­
anty.
Subrogation.
Future action against mortgagor.
Suit by Administrator.
Creditor’s record and reports re­
quired.
Failure to supply information.
Notice to Administrator.
Right to inspect books.
Forms, construction to be placed on
references to.
Disqualified lenders and bidders.

A u t h o r it y : §§ 36.4200 to 36.4251, inclu­
sive, issued under 58 Stat. 284.

§ 36.4200 Definitions. Wherever used
in §§ 36.4200 to 36.4251, inclusive, unless
the context otherwise requires, the terms
defined in this section shall have the
meaning herein stated, namely:
(a) “ Administrator” means the Ad­
ministrator of Veterans Affairs or any
employee of the Veterans Administra­
tion designated by him to act in his
LOANS ELIGIBLE FOR GUARANTY
stead.
36.4202 Eligible location.
(b) “ United States” used geographi­
36.4203 Loans for business purposes.
36.4204 Loans for the acquisition of a bpsi- . cally means the several States, Terri­
tories and possessions, and the District
ness.
of Columbia.
36.4205 Loans for purchase of equipment
(c) “ State” means any of the several
and supplies.
(a) Loans for the purchase of equipment,
States, Territories and possessions, and
machinery or tools (new or used).
the District of Columbia.
(b) Loans for the purchase of supplies.
(d>' “Designated agency” or “ agency”
36.4206 Second loans to complete a purchase.
as used in respect to processing applica­
36.4207 Life insurance, or additional secur­
tions for guaranty of loans, means any
ity
Federal instrumentality designated by
36.4208
the Administrator (including Veterans
(a) Loans for the purchase of business
Administration if so designated) to cer­
realty (land, building).
(b) Mortgages required on business realty.
tify whether an application meets the
36.4209 Transfer of title.
requirements of the Act and regulations,
36.4210 Obligation of guarantor.
and recommend whether the application
Sec.
should be approved if the applicant is
36.4211 Contract provisions.
found eligible.
36.4212 Repayment provisions, business
(e) “ Federal agency” as used with
loans.
respect to agencies making, guarantee­
36.4213 Prepayments.
36.4214 Pro rata decrease of guaranty.
ing or insuring primary loans, means
36.4215 Insurance coverage required.
any Executive Department, or adminis­
36.4216 Loan charges.
trative agency or unit of the United
36.4217 Interest.
States Government (including a corpora­
36.4218 Advances.
tion essentially a part of the Executive
Branch) at any time authorized by law
GUARANTY BY THE ADMINISTRATOR
to make, guarantee or insure such loans.
36.4220 Limits.
(f) “ Guaranty” means the obligation
36.4221 Second loan under section 505 (a )r
of the United States of America assumed
36.4222 Two or more eligible veterans or bor­
by virtue of the guaranty by the Ad­
rowers.
36.4223 Maximum liability where there are
ministrator as provided in Title III of the
two or more veterans.
Servicemen’s Readjustment Act of 1G44
36.4224 Veteran’s application.
(58 Stat. 284; 38 U.S.C. 693) and subject
36.4225 Papers required.
to the limitations and conditions thereof
36.4226 Recommendation for approval of
and of §§ 36.4200 to 36.4251, inclusive.
guaranty.
The subject of the guaranty is that por­
tion of an eligible loan procured by an
1As printed in the F ederal R egister,
eligible veteran which may be subject to
Volume 9, Number 256, Washington, Sat­
urday, December 23, 1944.
being guaranteed as provided in said
623854°—44

(l)

Title III, as determined by the Adminis­
trator upon application in accordance
with §§ 36.42C0 to S3.4251, inclusive.
(g) “ Mortgage” means an applicable
type of security instrument commonly
used or legally available to secure loans
or the unpaid portion of the purchase
price of real or personal property in a
State, District, Territory, or possession
of the United States of America in
which the property is situated. It in­
cludes, for example, deeds of trust, se­
curity deeds, escrow instruments, real
estate mortgages, conditional sales
agreements and chattel mortgages.
(h) “ Secondary” or “ junior” loan
means a loan which is secured by a lien
or liens subordinate to any other lien or
liens on the same property.
(i) “ Guaranteed loan” means a loan
unsecured, or secured by a primary lien,
or where permissible under the act and
§§ 36.4200 to 36.4251, inclusive, a second-ary lien, which loan is guaranteed in
whole or in part by the Administrator
as evidenced by endorsement thereon;
or by Loan Guaranty Certificate issued
by the Administrator, and which shall
have become effective as prescribed by
§§ 36.4200 to 36.4251, inclusive, or by such
other legal evidence as may be provided
by the Administrator.
(j) (1) “ Business” means any gainful
occupation or profession other than
farming which constitutes the appli­
cant’s major occupation.
(2) “Business loan” means an obliga­
tion for all or part of the purchase
price, or a loan obtained for the pur­
pose of paying all or part of the pur­
chase price o f (i) the entire, or a part
interest in, an existing business enter­
prise whether it is, or is to be operated
by an individual, partnership or joint
venture, and includes leasehold rights
as lessor or lessee of real or personal
property a part of such enterprise and
similarly good will, franchise rights, and
rights as licensee, (ii) supplies, machin­
ery, equipment or tools.
(3) “ Business realty loan” means a
loan for the purchase of land or build­
ings or both to be used by the applicant
in pursuing a gainful occupation other
than farming. Leasehold rights in­
cluded in subparagraph (2) will not be
deemed “ business realty.”
(4) “Purchased or to be purchased”
as used in section 503 (1) of the act
refers to real or personal property to be
used for a purpose stated in section 503
of the act, whether the property is pur­
chased contemporaneously with such
application, or is to be purchased sub­
sequent thereto. But as to any loan for
a future purchase the guaranty will be­
come effective only from the time the
purchase is consummated.
(k) (1) “Reasonable normal value” for
the purposes o f the act is that which
can be justified as a fair and reasonable
price to be paid for the real or personal
property for the purposes for which it
is being acquired, assuming a reason­
able business risk, but without undue
speculative or other hazard as to the
future of such value.
(2)
The purpose and intent are to
assure that the price to be paid is not
in excess of that on which a fair profit

2
standing, approved in writing by the Ad­
can be earned based on (i) the past
plication for guaranty may be denied for
ministrator to appraise property. An
record, if any; (ii) the reasonable prob­
that reason unless upon consideration
applicant for designation as an approved
abilities of the future; and (iii) reason­
of all the facts the Administrator de­
appraiser shall show to the satisfaction
ably efficient management.
termines otherwise. Such determination
of the Administrator that he is of good
(1)
(1) “Land” as used in section 503at the option of the lender or borrower
character and that his experience and
may be obtained upon a special submis­
of the act refers to an interest in realty
information enable him to form sound
sion of all the facts prior to taking ap­
defined in this section, and subject to
opinions as to the reasonableness of the
plication for guaranty.
the conditions therein.
(i) An interest in realty may be a fee
(vi)
A mortgage on an undivided in ­ purchase price or cost of property to be
appraised in the territory in which he
simple estate, or certain other estates
terest in realty shall not be acceptable
expects to operate.
indicated in subdivisions (i) to (vi) of
unless all co-tenants of the veteran join
A list of appraisers, considered by the
this subparagraph (1) (including an
in the mortgage, and unless such joinder
Administrator to be in good standing at
estate for years) eligible as security for
has the legal effect of creating a lien on
the time §§ 36.4200 to 36.4251, inclusive,
guaranteed loans. But in any event the
the property such as is otherwise re­
become effective, may be approved.
estate shall be one limited to end at. a
quired. In such case it shall not be re­
(p) “ Certificate of title” means, with
date more than 14 years after the ulti­
quired that the co-tenants join in, en­
respect to real property, a written and
mate maturity date of the loan, or when
dorse, or otherwise become personally
signed opinion or statement as to title
the fee simple title shall vest in the
liable on the veteran’s indebtedness.
by a qualified member of the bar of, or
Notwithstanding such joinder in the
lessee; except that, if it is a leasehold
by a title company authorized to do such
that terminates earlier, it shall neverthe­
mortgage by the co-tenants the value of
business in, the jurisdiction in which the
the security for purpose of guaranty shall
less be acceptable if lessee has the ir­
mortgaged property is situated; or at the
revocable right to renew for a term end­
be determined with respect to the indi­
option of borrower and lender a title in­
ing more than 14 years after the ultimate
vidual interest of the veteran only, and
surance or guaranty contract by a corpo­
the guaranty will be limited to the proper
maturity date of the loan or until the fee
ration authorized to engage in such busi­
simple title shall vest in lessee: Provided
proportion of that sum, irrespective of
ness in the State wherein the property
The mortgagee obtains a mortgage lien
the actual amount of the loan.
is situated; or appropriate evidence of
of the required dignity upon such option
(2) “Buildings” as used in section 503
title in the proposed encumbrancer pur­
right or anticipated reversion or re­
of the act refer to structures of a per­
suant to a Torrens or other similar title
mainder in fee.
manent nature which are attached to
registration statute.
(ii) A life estate or other estate of
and become a part of the land.
(q) “ Credit report” means the report
uncertain duration is'excluded, unless the
(3) “Personal property” means tangi­
submitted by any credit reporting agency
remainder interests are also encumbered
ble or intangible property other than
of at least five years’ experience with
by a lien of the same dignity to secure
land or buildings as defined in paragraph
facilities for national coverage, approved
the same debt.
(1) (1) and (1) (2) of § 36.4200 if such by the Administrator, or any other form
(iii) A remainder interest in realty
property is to be used in a business con­
of report acceptable to the Administrator
shall be eligible as security for a guar­
ducted by the veteran as prescribed in
for the purpose of determining the ap­
anteed loan only in the event that all
§§ 36.4200 to 36.4251, inclusive. It in­
plicant’s credit standing.
the owners of intervening immediate or
cludes property which by reason of the
(r) “ Eligible veteran” means a veteran
remainder interests lawfully can and do
contract of the seller and purchaser re­
who:
(a) joint in the mortgage in such man­ mains personalty notwithstanding that
(1) Served in the active military or
except for such contract it would become
ner as to subject all such intervening
naval service of the United States on or
a “ fixture,” or otherwise a part of the
estates to the lien; or (b) execute and
after September 16,1940, and before the
realty.
deliver a lease or other proper convey­
officially declared termination of World
ance to the owner of the ultimate re­
(4) “ Supplies” mean those articles
War II.
mainder in fee simple in such manner
normally used, necessary and expended
(2) Shall have been discharged or re­
as to assure his legal right to possession
in the operation of a business or pro­
leased from active service under condi­
and enjoyment until the vesting of his
fession, including those required by the
tions other than dishonorable, either
ultimate remainder interest.
service industries, both personal and in­
(i) After active service of ninety days
dustrial.
(iv) If other than a fee simple estate
or more, or
or estate for years with minimum dura­
(5) “ Equipment, machinery and tools”
(ii) Because of injury or disability in­
tion as stated in subdivision (i) of this
mean all such articles commonly so de­
curred in service in line of duty, irrespec­
subparagraph (1) is offered as security
scribed, and which are required for use
tive of the length of service; and
full information may be submitted to the
in pursuing a gainful occupation other
(3) Applies for the benefits of this
Administrator before taking application
than the resale thereof and which will be
Title within two years after separation
from the veteran. The Administrator
useful and reasonably necessary for the
from the military or naval forces, or
shall determine, the eligibility of any
efficient and successful pursuit of such
within two years after the officially de­
occupation. Equipment shall include
such estate.
clared termination of World War II,
structures which by operation of law or
(v) The existence of any of the follow­
whichever is later. In no event, however,
the
terms
of
the
applicable
lease
or
other
ing will not require denial of the guar­
may an application be filed later than
contract of the parties, do not become a
anty; hence will not require special sub­
five years after such termination of such
part of the realty, and which may be re­
war.
mission:
moved without consent, or further con­
(s) “ Eligible lenders” are persons,
(a) Outstanding easements for public
sent, of the land owner.
firms, associations, corporations and
utilities, party walls, driveways, and sim­
“ governmental agencies and corpora­
(m) “ Indebtedness” means the unpaid
ilar purposes;
tions, either State or Federal” .
principal and accrued interest on the
(b) Customary building or use restric­
(t) “ Creditor” means the payee, or any
note, bond or other obligations, the sub­
tions for breach of which there is no
ject of the guaranty, and includes also
subsequent holder of the indebtedness,
reversion and which have not been vio­
taxes, insurance premiums and any other
and includes a mortgagee.
lated to a material extent;
items for which the debtor is liable un­
(u) “ Debtor” means the maker of the
(c) Slight encroachments by adjoin­
der the terms of the mortgage, or other
note or obligor in any other obligation,
ing improvements;
contract, including proper contractural
or any other person who is, or becomes,
(d) Outstanding water, oil, gas or other
or statutory trustee fees and attorney
liable thereon, by reason of a contract of
mineral, or timber rights which do not
fees, if any.
assumption or otherwise.
and will not materially impair the value
(v) “ Used or conducted by a veteran”
(n) “ Note” means a promissory note, a
for business purposes, and which are
bond, or other instrument evidencing the
means personally directed and operated
customarily waived by prudent lenders
by a veteran on the site, with or without
debt and the debtor’s promise to pay
in the community: Provided, however,
hired labor; not solely operated-by a ten­
same.
That if there-is outstanding any legal
ant or an employee who does not receive
(o) “ Appraiser” means an individual
right to quarry, mine or drill within 400
supervision and direction by the veteran,
or firm or corporation o f recognized
feet of the encumbered building the ap­

3
(w)
“Interest” means the compensa­ active part in the management and direc­
tion fixed by law or by the parties to a
tion thereof. The ultimate maturity of
contract, for the use or detention of, or
such loans shall not be in excess of 5
years.
forbearance with respect to, money, ir­
respective of the name applied to such
(b) When the veteran purchases an
interest in an existing business which
compensation.
interest will constitute security for a
§ 36.4201 Miscellaneous. Throughout
guaranteed loan, the bill of sale or other
§§ 36.4200 to 36.4251, inclusive, unless the
appropriate instrument shall expressly
context otherwise requires: (a) the sin­
provide that the good will is included, and
gular includes the plural; (b) the mascu­
when appropriate, and in every case in
line includes the feminine and neuter;
the service industries, shall contain ap­
(c) person includes corporations, part­
propriate provisions, lawful in the ju ­
nerships and associations; (d) month
risdiction, forbidding or restricting the
means calendar month, i. e., the period
seller’s engaging in a similar business
beginning on a certain date in one month
within such period of time and such area
and ending at midnight on the preceding
as the seller and purchaser agree. En­
date of the next month; (e) “ the act”
cumbrance on interests in the business so
or “ the statute” means the Servicemen’s
acquired shall include all such rights,
Readjustment Act of 1944, Ch. 268— 78th
and in all cases, encumbrances on busi­
Congress—2d Session, (Public No. 346),
ness interests shall expressly include good
58 Stat. 284; 38 U.S.C. 693; (f) Title III
will.
means Title II of the act.
(c) (1) To the extent practicable and
legally permissible, all assets of the busi­
LOANS ELIGIBLE FOR GUARANTY
ness acquired shall be pledged as securi­
§ 36.4202 Eligible location. To be eli­
ty for the loan.
gible for guaranty a loan for any of the
(2) Cash, notes, accounts receivable
purposes stated in section 503 must be
and other choses in action not an inte­
in connection with an enterprise which
gral part of the business may be ex­
has its principal place of business within
cluded.
the United States and any real or per­
(3) The lien on personalty may be a
sonal property encumbered to secure a
secondary lien provided the first lien
loan shall be situated within the United
secures only an obligation for part of
States. Temporary removal for use in the
the purchase price thereof.
course of the business will not affect the
(4) If realty is acquired in the trans­
guaranty if the lien is not affected.
action the lien on the realty shall be a
§ 36.4203 Loans for business purposes.
first lien unless § 36.4206 is applicable.
Section 503 of the act provides for grant­
(d) If the indebtedness of the vet­
ing to an eligible veteran “ the guaranty
eran is not adequately secured by lien
of a loan to be used in purchasing any
on the entire interest in specific chat­
business, land, buildings, supplies, equip­
tels or other personal property but is
ment, machinery, or tools, to be used
secured by undivided interests in spe­
cific chattels or other personal property,
by the applicant in pursuing a gainful
occupation (other than farm ing).” The
or in a business enterprise owned by
application, therefore, may be approved
more than one person, the requirement
by the Administrator if he finds that:
of paragraph (1) (1) (vi) of § 36.4200,
(a) The proceeds of such loan will be
relating to undivided interests in realty
shall be applicable to the interests in
used for payment for real or personal
property purchased or to be purchased
said chattels or business or other per­
sonal property.
by the veteran and used by him in the
bona fide pursuit of such gainful occu­
(e) Loans for the acquisition of addi­
pation;
tional inventory or for other working
(b) Such property •will be useful in
capital purposes are not included in the
act.
and reasonably necessary for the efficient
and successful pursuit o f such occupa­
§ 36.4205 Loans for purchases of
tion;
equipment and supplies— (a) Loans for
(c) The ability and experience of the
the purchase of equipment, machinery
veteran, and the conditions under which
or tools (new or used). (1) A loan for
he proposes to pursue such occupation,
the entire purchase price of such articles,
are such that there is a reasonable like­
to be guaranteed in whole or in part,
lihood that he will be successful in the
shall be secured by a conditional sales
pursuit of such occupation;
agreement, or by a first lien. The ulti­
(d) The purchase price paid or to be
mate maturity of such loans shall not be
paid by the veteran for such property
in excess of 3 years.
does not exceed the reasonable normal
(2) A loan for the initial payment on
value thereof as determined by proper
the purchase price of such articles shall
appraisal; and
not exceed one-third of the purchase
(e) The loan appears practicable.
price and subject to the same limitation
§ 36.4204 Loans for the acquisition of
shall not exceed $1,000.00. The ulti­
mate maturity of such loans shall not be
abusiness. (a) The assets to be acquired
in excess of one year for loans which
may consist of real or personal property,
do not exceed $500.00, or 2 years for
tangible or intangible, or a combination
loans exceeding $500.00. Loans for such
of any such. The business so acquired
purposes shall be secured by second lien.
may be operated by an individual or a
(3) In on event will application for
partnership. The appropriate contracts
guaranty be granted in respect to an
or circumstances shall assure that upon
obligation for the unpaid purchase price
acquisition of the contemplated interest
or any part thereof’ if application for
in the business enterprise the veteran, as
guaranty shall have been granted (or is
sole owner or as partner, shall have an

pending) in respect to the initial pay­
ment on the purchase price of the same
property as contemplated by subpara­
graph (2).
(b)
Loans for the purchase of supplies.
A loan for the purpose of purchasing
supplies as defined in § 36.4200 (1) (4)
may be made if the loan does not exceed
$1,000.00 and the maturity does not ex­
ceed 1 year. Such loans may be unse­
cured if security is not practicable or
customary.
§ 36.4206 Second loans to complete a
purchase. If the loan secured by a first
lien is made, guaranteed or insured by
a Federal Agency pursuant to law or reg­
ulation applicable thereto as provided in
section 505 (a) of the act, and applica­
tion is made to the Administrator to
guarantee a second loan to cover all or
part of the purchase price, such appli­
cation may be granted if otherwise
proper under the act and §§ 35.4200 to
36.4251, inclusive, notwithstanding the
loan is not secured by a first lien.
In such case the second loan shall n ot
exceed 20% of the purchase price and
the rate of interest shall not exceed 4%
per annum.
§ 36.4207 Life insurance, or additional
security. The lender and borrower may
make mutually acceptable arrangements
for life insurance, or for other security
in addition to the property, if any, en­
cumbered to secure the guaranteed loan.
§ 36.4208 (a) Loans for the purchase
o f business realty {land, building). Ex­
cept as provided in section 505 of the
act, loans for the purpose of purchasing
business realty and in respect to which,
any guaranty is sought, shall be secured
by a first lien on such property; but th e
existence of tax or special'assessment
prior liens will not disqualify security
which is adequate and otherwise accept­
able.
(b)
Mortgages required on business
realty. (1) Each business realty loan
guaranteed under the provisions of T itle
III must be evidenced by a note or notes
secured by appropriate security instru­
ment or instruments (mortgage legally
sufficient in the jurisdiction in which
the property to be encumbered is situ­
ated) . If the loan to be guaranteed does
not exceed $500 and the lender does n ot
require a mortgage, the Administrator
may nevertheless guarantee such loan
provided it complies otherwise with the
act and §§ 36.4200 to 36.4251, inclusive.
(2) The law of the State where the
contract is made determines the capacity
of the parties to contract. Similarly the
law of the State wherein the real estate
or personal property is situated deter­
mines the capacity of mortgagor to en­
cumber and of the mortgagee to hold the
legal rights resulting from encumbrance.
The act does not modify such law of the
State. The guaranty by the Adminis­
trator will be available only in the event
that under the applicable State law the
contract between the borrower and
lender is binding on both, and the mort­
gage has the legal effect intended. Subparagraph (2) of this paragraph will be
applicable particularly in cases involv­
ing .minors, “ persons of unsound mind,”

4
and persons under other legal disability
by reason of the law of the State. It will
be applicable also in cases involving
mortgage or other loans which any
guardian, conservator, or other fiduciary
seeks to make or obtain; and to a guar­
anty thereof for which application is
submitted.
(3) A term loan, which is in accord
with applicable State or Federal law, and
regulations, if any, may be eligible for
guaranty if the amount of the loan to
be guaranteed plus the unpaid amount
of all obligations secured by liens su­
perior to the lien securing the proposed
loan does not exceed two-thirds of the
reasonable normal value of the property
encumbered to secure the loan and if
the ultimate maturity date of the mort­
gage indebtedness so secured, and to be
guaranteed, is not more than five years
from the date of the note. Such supe­
rior liens shall not be mortgage liens,
except when the guaranty is issued pur­
suant to section 505 of the act.
(4) Except as provided in subpara­
graph (3) of this paragraph the loan
shall be amortized. The obligation to be
amortized may, and except for the first
year shall, require such periodical pay­
ments of stated sums as will in accord­
ance with standard amortization practice
result in payment of the entire princi­
pal and interest within not more than 20
years from the date of the loan, or the
date of assumption by the veteran,
whichever is later. At the request of the
mortgagor the payments during the first
year shall be less than the amount re­
quired thereafter, by the sum represent­
ing the interest charge on the guaranteed
part of the loan, and which interest
charge the Administrator will pay at the
end of that- year.
§ 36.4209 Transfer of title. The con­
veyance or other transfer of a veteran’s
interest in a business, or in other prop­
erty, real, personal or mixed, which has
been acquired wholly or in part with
the proceeds of a loan guaranteed in
whole or in part by the Administrator,
shall not terminate or otherwise affect
the contract of guaranty, unless (a) the
creditor by express agreement for that
purpose releases or otherwise discharges
the veteran from personal liability there­
on; or (b) by indulgence of, or by .agree­
ment with, the veteran’s immediate cr
remote grantee, or vendee, contrary to
§§ 36.4200 to 36.4251, inclusive, and with­
out the consent of the Administrator the
creditor so alters the contract made by
the veteran with the lender as to cause
discharge of the veteran by operation of
law.
§ 36.4210 Obligation of guarantor.
To the extent prescribed the obligation
of the United States is that of a guar­
antor, not an indemnitor.
§ 36.4211 Contract provisions. Sub­
ject to the provisions of the act and
§§ 36.4200 to 36.4251, inclusive, the con­
tract between the lender and borrower
may contain such provisions as they
agree upon and which are reasonable and
customary in the locality where the
property is situated.

§ 36.4212 Repayment provisions, busi­
ness loans, (a) Subject to §§ 36.4204,
36.4205 and 36.4208 the terms of repay­
ment of the loan to be guaranteed may
be such as the lender and borrower agree.
Such terms should be predicated pri­
marily upon the anticipated earning ca­
pacity of the business, the nature and
normal useful life of the security, if any,
and other material factors that would
be considered by reasonably prudent
persons similarly situated. Generally,
such loans should be repayable on a
monthly, quarterly, or seasonally amor­
tized basis. An unamortized loan, ex­
cept as provided in § 36.4208 (b) (3) will
not be guaranteed.
(b) The loan agreement may provide
for variable amortization payments de­
pendent upon the earnings of the busi­
ness, and for such other reasonable pro­
tective options as usually are required
by prudent lenders of the community in
comparable transactions.
(c) Any loan guaranteed by the A d­
ministrator under Title III of the act
shall be payable in full in not more than
twenty years.
§ 36.4213 Prepayments.
(a) When
the debt is to be amortized the note or
other evidence thereof, or the mortgage
securing same, shall contain appropriate
provisions granting any person liable for
such debt, the right to pay at any time
the entire unpaid balance or any part
thereof. Unless otherwise agreed all
such prepayments shall be credited to
the unpaid principal balance of the loan
as of the due date of the next instalment.
No premiums shall be charged for any
partial or entire prepayment.
(b) Any person liable shall be entitled
to prepay a term loan, or any part there­
of, upon not less than one month’s notice.
The note or mortgage shall so provide.
(c) Any prepayment shall be applied
in the manner and to the items directed
by the person making the prepayment.
§ 36.4214 Pro rata decrease of guar­
anty. The amount of the guaranty shall
decrease pro rata with any decrease in
the amount of the unpaid principal of
the loan, prior to the date the claim is
submitted.
§ 36.4215 Insurance coverage required.
(a) Buildings the value of which enter
into the appraisal forming the basis for
the loan guaranteed shall be insured
against fire, and other hazards against
which it is customary in the community
to insure and in reasonable amount,, at
least equal to the amount by which the
loan exceeds the value of the encum­
bered land, plus that of the improve­
ments included in the appraisal but
which are not subject to the hazards in­
sured against: Provided, That upon a
satisfactory showing at the time of ap­
plication for guaranty that (1) it is im­
possible or impracticable to obtain such
insurance because of location, prohibi­
tive cost, or other good reason; (2)
prudent lenders in such community cus­
tomarily do not require such insurance,
or some portion thereof (amount or haz­
ard), and (3) the lender submitting the
application is willing to make the loan
without insurance coverage on one or

more of the buildings, or without certain
coverage, or in a reduced amount, and
subject to the provisions of paragraphs
(b) and (c) of this section; the Admin­
istrator may at the time of approving
the application waive all or part of such
insurance requirements, subject to the
provisions of said paragraphs (b) and
(c) of this section. No waiver will be
granted on the basis of premium cost in
any case wherein the premium cost on
an annual basis does not exceed $5.00
per $1,000 of insurance against the haz­
ard of fire, or $10.00 per $1,000 for fire
and all other hazards covered by the in­
surance. For loans on personality, in­
surance collectible in amount equal to
the debt and against the hazards usually
insured against, if reasonably available,
at reasonable cost shall be required. The
insurance coverage on personalty will be
a factor in determining the practicability
of the loan. The procuring of insurance
of the amount and coverage stated in
the approved application shall constitute
conclusive evidence of waiver by the Ad­
ministrator of insurance in excess of the
amount stated in or in connection with
the application and also all hazards and
property not mentioned therein as haz­
ards and property to be covered.
The creditor shall require that there
be maintained in force such insurance of
the coverage stated in the approved ap­
plication in an amount not less than the
amount stated or the amount of the un­
paid indebtedness whichever is the lesser.
In the event insurance becomes un­
available the fact shall be reported
to the Administrator for determination
whether waiver shall be granted or loan
declared in default.
(b) For the sole purpose of determin­
ing the amount payable upon a claim un­
der the guaranty after an uninsured loss
(partial or total) has been sustained, the
unpaid balance of the loan (except as
provided in paragraph (c) of this sec­
tion) will be deemed to have been re­
duced by an amount equal to the amount
of the uninsured loss, but in no event
below an amount equal to the value of
the land and other property remaining
and subject to the mortgage.
(c) There shall be no reduction of the
amount of the guaranty as provided in
paragraph (b) of this section by reason
o f an uninsured loss which is uninsured
(as to hazard or amount) by reason of a
waiver by the Administrator as provided
in paragraph (a) of this section.
(d) All insurance effected on the m ort­
gaged property shall contain appropri­
ate provisions for payment to the credi­
tor (or trustee, or other appropriate per­
son for the benefit of the creditor), of
any loss payable thereunder. If by rea­
son o f the creditor’s failure to require
such loss payable provision in the in­
surance policy payment is not made to
the mortgagee the liability on the guar­
anty nevertheless shall be reduced as
provided in paragraph (b) of this section
with respect to an uninsured loss, ex­
cept to the extent that the liability under
the policy was discharged by restoring
the damaged property, by the insurer, or
out of payments thereunder. to the in­
sured, or otherwise. No waiver pursuant

5
to paragraph (a) of this section shall
modify this paragraph ( d ) .
(e) Upon the creditor (or trustee or
other person) collecting the proceeds of
any insurance contract, or other sum
frcm any source by reason of loss of or
damage to the mortgaged property, he
shall be obligated to account for same, by
applying it on the indebtedness, or by
restoring the property to the extent the
expenditure of such proceeds will permit.
As to any portion of such proceeds the
mortgagee is not entitled to retain for
credit on such indebtedness or by reason
of other legal right he shall hold and be
obligated to pay over the same as trustee
for the United States and for the debtor,
as their respective interest may appear.
( f ) Nothing in § § 36.4200 to 36.4251, in­
clusive, shall operate to prevent the vet­
eran from procuring acceptable insur­
ance through any authorized insurance
agent or broker he selects. In all cases
the insurance carrier shall be one licensed
to do such business in the State wherein
the. propei'ty is situated.
§ 36.4216 Loan charges, (a) In the
case of a purchase of business or real or
personal property by the veteran, and a
guaranty pursuant to the act and
§§ 36.4200 to 36.4251, inclusive, of an in­
debtedness representing part of the pur­
chase price, there may be charged to the
veteran and included in said note
amounts actually paid or incurred by
the seller (mortgagee) for such expenses
and charges as are chargeable to-such
purchaser in accord with local custom,
if the purchaser so agrees, such as fees
for appraisals, credit and character re­
port on the veteran, surveys, fees of pur­
chaser’s (not seller’s) attorney, record­
ing fees for recording the deed (or other
conveyance) and the mortgage only, pre­
miums on fire and other hazard insur­
ance that may be required in accordance
with §§ 36.4200 to 36.4251, inclusive.
(b) In the case of a loan to the vet­
eran, charges in accord with local cus­
tom, such as fees for appraisals, credit
and character report, surveys, abstract,
or title search, curative work and instru­
ments, attorney fees, fees for tax cer­
tificates showing all taxes paid, premiums
on fire and other hazard insurance that
may be required in accordance with
§§ 36.4200 to 36.4251, inclusive, revenue
stamps, recording fees, etc., all limited to
amounts actually paid or incurred by the
lender, may be charged to the borrower
and withheld from the gross amount of
the loan.
(c) Any unreasonable charges shall be
grounds for denying an application for
guaranty. No brokerage or other charges
shall be made against the veteran for
obtaining any loan guaranty under this
title.
§ 36.4217 Interest, (a) The rate of
interest chargeable on a loan guaranteed
fully or in part, shall not exceed 4 per
centum per annum on unpaid principal
balances. Interest may be computed in
accordance with standard amortization
practices.
(b) The rate of interest on a second­
ary loan which is guaranteed pursuant
to section 505 of the act may exceed by
not more than 1% per annum the rate

charged on the principal loan, but in no
event shall the rate on the secondary loan
exceed 4% per annum.

for the same veteran does not exceed
$ 2 , 000.

(c)
The loan conforms to all other
applicable requirements of §§ 36.4200 to
36.4251, inclusive.

§ 36.4218 A d v a n c e s , (a) Nothing
herein shall prevent the creditor from
§ 36.4222 Two or more eligible vet­
making advances for the benefit of the
erans or borrowers, (a) In the absence
mortgagor to pay taxes, and assessments
of a statement to the contrary, an ap­
on the real property (if any) securing the
plication signed by two or more eligible
indebtedness, insurance premiums as
veterans shall be conclusively presumed
they become due and the cost of the
to be an application by each for the
emergency repairs needed to protect the
guaranty of an equal proportionate part
some particular emergency requirement
of the entire amount to be guaranteed:
of the business other than a working cap­
Provided, however, That if husband and
ital requirement, in order to prevent a de­
wife execute the application, both being
fault or to protect the security for the
eligible veterans, it will be conclusively
loan. The amount guaranteed by the Ad­
presumed in the absence of a contrary
ministrator shall be increased pro rata
statement in the application that it is
with all such increases in the unpaid
an application for guaranty on behalf of
principal balance of the loan; Provided,
the husband only, unless the amount o f
That (1) the annual interest rate on
guaranty then available to the husband
all advances shall not exceed 4 per
is insufficient to meet the requirements
centum per annum; (2) the terms of re­
of the case for guaranty of a proper
payment ’shall not extend the date of
amount under §§ 36.4200 to 36.4251, in ­
the amortization of the loan, (3) the
clusive, and the terms of the applica­
amount of the guaranty shall in no event
tion ; in which event the deficiency may
exceed the original amount thereof, nor
be charged against the amount avail­
exceed the percentage of the indebted­
able to the wife, unless she has in the
ness originally guaranteed, and (4) as
application or otherwise (before ap­
to advances to cover an emergency re­
proval) stated in writing her unwilling­
quirement, the transaction is reported to
ness to be so charged.
the Administrator before or within 10
(b) The Administrator will not require
days after such advance, and is approved
a wife to sign an application made by
by him.
(b)
In the case of any advance made her husband. I f she also is an eligible
veteran and desires to exercise her right
by a creditor to a debtor, the creditor
as such to obtain a guaranty, a separate
with the consent of the debtor, may ap­
application by her will be required. Sig­
ply any and all payments made by the
nature of her husband to indicate his
debtor for a period of twelve months to
pro forma joinder will be required only
the liquidation of the advance without
when the wife is resident of, or the ap­
considering the original loan in default.
This shall not be construed to extend the, plication is signed in, or the property to
be encumbered is situated in, a State
period of indulgence contemplated by
under laws of which such contract can­
§§ 36.4234 and 36.4235.
not be legally executed by a married
GUARANTY B Y /THE ADMINISTRATOR
woman alone as in the case of an un­
married woman.
§ 36.4220 Limits. In no event will
the aggregate obligations of the United
§ 36.4223 Maximum liability where
States is guarantor under Title III ex­
there are two or more veterans, (a)
ceed $2,000 in respect to one veteran,
For the purpose of determining the m ax­
whether there be one or several loans, and
imum amount of the potential liability
whether some are obtained for the ac­
of the United States under a guaranty
quisition of a home, others for a farm,
incident to an obligation on which twlo
and others for business, or equipment,
or more eligible veterans who applied
or other purposes. Repayment of a loan
for the guaranty are liable, the obliga­
or loans in whole or in part, or transfer
tion will be deemed a several, and not
o f the encumbered property does not
a joint, obligation of the respective ap­
modify or enlarge such limitation. The
plicants who were charged with the
guaranty shall not at any time exceed 50
guaranty or a part thereof notwith­
per centum of the aggregate of the in­
standing that as among the debtors or
debtedness for any of the purposes spec­
any o f them, and as between them, or
ified in sections 501, 502 and 503 of the
any of them, and the creditor, the ob­
act.
ligation is in fact and lav/ a joint obli­
gation or a joint and several obligation.
§ 36.4221 Second loan under section
(b) In no event will the amount of
505 (a ). Section 505 (a) of the act pro­
any veteran’s debt thereunder be deemed
vides that when the principal loan for
to exceed for guaranty purposes the
any of the purposes stated in section 501,
502 or 503 is “ approved by a Federal
amount for which such veteran is le­
agency to be made or guaranteed or in­
gally liable to the holder of the obliga­
sured by it pursuant to applicable law
tion, nor the value of the interest of the
and regulations, and the veteran is in
veteran in the property. If more than
need of a second loan to cover the re­
one of the obligors is an eligible veteran
mainder of the purchase price or cost, or
and application by him or them is
a part thereof,” the Administrator may
granted, the m a x i m u m aggregate
guarantee the full amount of the second
amount of the guaranty will be the sum.
loan, Provided:
of
the amounts available to each apply­
(a) It does not exceed 20 per centum
ing veteran but in no event will the
of the purchase price or cost.
aggregate of the guarantees for more
(b) The amount guaranteed together
than one veteran exceed 50 per centum
With all other guarantees under Title III

6
of the total loan except as provided
under section 505 of the act.
For the purpose of § 36.4223 the wife
of a principal obligor shall not be counted
unless (1) she is legally liable on the
obligation under the law of jurisdiction
where she executed it, and (2) if she is
a veteran she be properly chargeable
with a part or all of the guaranty as pro­
vided in § 36.4222.
§ 36.4224 Veteran’s application, (a)
To apply for a guaranteed loan the vet­
eran and the prospective lender shall
complete and sign in duplicate Form 1842,
Application for Business or Business
Realty Loan Guaranty, Form 1842b, if
loan does not exceed $5,000, and both
that form and Form 1842c, if the loan
exceeds $5,000, Supplement to Applica­
tion for a Business or Business Realty
Loan Guaranty (Exhibit A and Exhibit
B ) . Before or after preparing the appli­
cation, and before submitting it, the
lender and the veteran will address a
joint inquiry to the regional office or com­
bined facility having jurisdiction of the
territory in which the veteran resides
whether the proposed borrower is eligible
and the amount of his available guaranty.
This information will be supplied on Form
1800, Certification of Eligibility. In ad­
dition to the necessary identifying infor­
mation, they will state whether the prop­
erty to be encumbered is real or personal,
or both, the State and county in which it
is situated and the nearest highway. The
Administrator will reply on said Form
1800 or otherwise, stating the name and
address of an approved appraiser of
realty, and in the case of personal prop­
erty, the person or persons to function
as such. When the lender is a bank
Form 1845, Appraiser’s Check Sheet, may
be completed by the bank and forwarded
with the application to the agcrcy.
(b) Before forwarding the executed
application the prospective lender shall
procure a credit report on the borrower
and an appraisal of the business or real
property by the appraiser designated.
(c) In every case involving real prop­
erty, the appraiser’s report shall indi­
cate the basis, by survey or otherwise, of
identifying the property appraised as
that to be encumbered to secure the pro­
posed loan. Serial numbers, if any, and
other identifying data will be included in
a report dealing with personal property
to a sufficient extent to identify the prop­
erty appraised as that which is to be en­
cumbered.
(d) If the supplies, equipment, ma­
chinery, or tools purchased are new and
bought through normal commercial
channels, the invoice price will be consid­
ered “ the reasonable normal value” pro­
vided such price does not exceed the pub­
lished price less any available trade or
other discounts, and does not include any
amount representing a premium or other
charge for immediate possession or de­
livery. If the articles are “ used” an ap­
praiser will be designated by the Admin­
istration as provided in paragraph (a) of
this section.
(e) If (1) under §§ 36.4200 to 36.4251,
inclusive, a mortgage is not required and
(2) the lender does not require a mort­
gage, and (3) the loan otherwise com­

plies with §§ 36.4200 to 36.4251, inclusive,
paragraph (c) of this section; paragraph
(e) of § 36.4225; paragraphs (a ), (d) and
(e) of § 36.4230 shall beTnapplicable to
such loan and any guaranty thereof.
§ 36.4225 Paper required. The pro­
spective lender shall submit to the
agency the following papers:
(a) Certification of eligibility. (See
§ 36.4224 (a ).)
(b) Loan guaranty certificate. (Form
1841 attached to application.)
(c) Original application for guaranty
signed by prospective lender and bor­
rower. (See § 36.4422 (a ).)
(d) The credit report. (See § 36.4224
(b) and ( d ) .)
' (e) The appraisal report, if required.
(f) Copy of any option agreement,
loan agreement or conditional sales
agreement used in the transaction.
(g) Proposed loan closing statement
of the estimated amounts to be disbursed
by the lender for the account of the
borrower. (See Form 1861.)
(h) Unless stated in the mortgage, or
otherwise in the papers submitted, a
statement of the kinds and amounts of
insurance to be required to protect the
mortgagor, the lender and the Adminis­
trator against loss by fire and other haz­
ards, and the estimated premium cost
thereof. (See § 36.4215.)
(i) When applicable, the original and
copy (both signed) of Form 1862, Appli­
cation to Amend Loan Guaranty Certifi­
cate. (See § 36.4231 (c) and (d ).)
§ 36.4226 •Recommendation for ap­
proval of guaranty. The agency shall
review the papers to determine whether
it will recommend approval of the ap­
plication for guaranty.- Thereupon the
agency shall forward all the papers to
the appropriate office of the Administra­
tor with recommendation that (a) the
Administrator approve the application,
or (b) he disapprove it. If disapproval
is recommended the reasons therefor
shall be stated in writing at the time
the papers are forwarded. A recom­
mendation that the application be ap­
proved shall be appropriately endorsed
on the original of the application.

(c) (1) If for any reason the loan
transaction is not concluded and the
same or another lender thereafter wishes
to consider making a loan on the same
security described in the original appli­
cation, a supplemental application, if the
same lender, or a new application if a
different lender, may be submitted. If
accompanying it is a statement by the
borrower and lender that the condition
o f the security is substantially the same
as when the appraisal report was made,
the supplemental or new application may
be approved without a new appraisal, if
the supplemental or new application
shall have been received by the Admin­
istrator within three months from the
date of the appraisal report.
(2) Without reference to the time limit
stated in subparagraph (1) of this para­
graph (c) a copy of the appraisal report
will be supplied without cost to a pro­
spective new lender, or to the original
proposed lender at the currently pre­
scribed price for a copy.
§ 36.4228 Execution and form of guar-,
anty. (a) If the Administrator approves
the application he shall notify the
Agency and the veteran therfeof. For the
purpose of evidencing the contract of
guaranty, he shall execute a loan guar­
anty certificate, to become effective upon
the conditions therein stated. It shall
be in substantially the form following:
Veterans Administration
Finance Form 1841
U nited S tates of A merica
LOAN GUARANTY CERTIFICATE ISSUED BY
VETERANS ADMINISTRATION

State _____________________________
(Where property is located)
(Lender, exactly as payee’s name will appear
on note.)

R. F. D. or Street

Post Office

County
(State)
Number LB _ _
_ __
(To be filled in by V. A.)
(Borrower-Veteran, exactly as to be signed
on note and mortgage.)
R. F. D. or Street

Post Office

§ 36.4227 Administrator’s action on
application, (a) Upon receipt of the
County
(State)
papers from the agency, the Administra­
I
tor will determine whether to approve
A. This certificate shall become effective
the application. If disapproved he shall
when the requirements of the statute and
return to the proposed lender all papers
regulations have been complied with and
except the original application for guar­
the acts certified in part III hereof have been
anty and the original appraisal report
accomplished in compliance with said re­
and shall state that the application for
quirements.
guaranty has been denied and the rea­
B. When it becomes effective as herein­
above prescribed, this certificate shall obligate
sons therefor. He shall send a copy of
the United States of America to pay to the
the letter to the veteran and the agency.
legal holder of the “note” described on the
Upon denial any expenses incurred by
reverse hereof upon his duly filing claim
the lender or borrower shall be borne
therefor:
by them or either of them as they shall
1. All or such portion of the maximum
have agreed.
amount hereby guaranteed as becomes pay­
(b) (1) The veteran and the proposed
able upon the conditions, at the times stated
lender, or either, may appeal to the Ad­
in, and in accordance with the provisions of
the Servicemen’s Readjustment Act of 1944
ministrator for review of a denial of the
(38 U. S. Code 693; 53 Stat. 284), and the
application.
issued pursuant thereto which
(2)
Such appeal may be by letter, or regulations
are in effect on the date of this certificate.
on any prescribed form, and shall be
In no event will the obligation under this
mailed or delivered to central office of
certificate exceed $2,000. Subject to the fore­
the Veterans Administration within one
going, this guaranty is f o r ----------- per cen­
tum of the principal amount of said “note,”
month after receipt of notice of denial.

7
but not for more than $____________ In no
cation unless the application indicates it is
for a loan to be secured by a second lien as
event will it exceed said percentage of the
principal amount.
prescribed by the regulations; and (4) if the
approved application for guaranty related to
2. At the expiration of 1 year from the date
of the “note,” an amount equal to the inter­
a loan wholly or partly to be secured by a
est for 1 year at the contract rate on that
hypothecation or a pledge of personal prop­
erty, such hypothecation or pledge has be­
portion of the indebtedness (“note” ) orig­
come effective by appropriate delivery to the
inally guaranteed hereby, such payment to be
lender and no superior lien has intervened
credited on the indebtedness as prescribed by
since date of application.
said regulations.
C.
Executed on behalf of the United States
(All signatures must be in ink)
of America by the Administrator of Veterans’
Affairs, through the undersigned authorized
(If a corporation)
agent on this date, to become effective in the
manner hereinabove prescribed.
(Secretary)
Mr.
Dated___________________
Mrs.
A dministrator of V eterans ’ Affairs ,
M iss__________________________
(Lender (s ))
B y ------------------------------------------------------(Authorized agent
[CORPORATE SEAL]
B y -------------------- ---------At -------- ---------------------------------------- (Post Office)
Title (President, vice president,
N o te : If loan is not closed, the proposed
etc.)
lender, or when paid, the holder of the note
Mr.
will mark this certificate “Cancelled,” sign
Mrs.
thereunder, and return to Veterans Admin­
M iss___________________________ ______
istration.
Mr.
II
Mrs.
Description of Property to be “Mortgaged”
M iss_________________________________
(Lot and. block, section and township, land
(Borrower (s))
lot and Land District etc. and surveyor’s
N
ote 1. If the note is unsecured, references
field notes where appropriate, and any other
to “mortgage” in paragraphs “A” and “B”
language proper to complete description.
above are inapplicable. (See Regulations,
Include description of personal property, if
§§ 36.4205 and 36.4208).
any. Describe fully: show serial numbers,
N ote 2. If the local law provides for filing
If available, or any other means of identifi­
only,
not recording, chattel mortgages or sim­
cation.)
ilar instruments, paragraph “B” above never­
Premises identified a s ------------------------------theless is to be completed. It refers to not
(Name of place, if any,
only the County Recorder or Clerk, but also
to the State Commissioner of Motor Vehicles
or other official who keeps motor vehicle
and R. F. D. Also number or name of nearest
mortgage records, and to other similar offi­
cials, State or County.
highway. Street and number in city, etc.)
(City, Town, Village)

(County, Parish)

(State, District, Territory)
III
CERTIFICATION by borrower and lender

A. We hereby warrant that (1) the under­
signed borrower names on the reverse hereof
executed the note, the face amount of which
is $________ _
consisting of $___________
principal and $------------------interest, as de­
fined in the regulations; (2) it is dated
t h e _______ day o f __________ 19__; (3) bor­
rower (s) and mortgagor(s) delivered it to­
gether with the “mortgage” (as defined in
the regulations) bearing the same date, and
executed to secure payment of said note;
(4) said note and mortgage are in the form
and type contemplated in the application of
the undersigned pursuant to which this loan
guaranty certificate was issued; and (5) the
principal stated above has been paid to, or
according to the directions of, the under­
signed borrower (s).
B. The undersigned lender warrants that
(1) the same “mortgage,” duly executed and
witnessed, acknowledged, or proved as re­
quired by lav;, was properly filed, or filed for
record, if and as provided by law on
t h e ----------- day o f ________ 19__, a t ____ M;
and was given file N o ._________ by the Re­
corder or other proper- officials; (2) that it
covers the property described on the reverse
hereof, which is the same property described,
or otherwise identified, or referred to, in the
above-mentioned application for guaranty,
and in this loan guaranty certificate or in
the Application to Amend Loan Guaranty
Certificate, if any, applicable to such loan;
(3) that no lien superior to said “mortgage”
has intervened since the date of said appli­

(b) The word principal as used in the
Loan Guaranty Certificate and the cer­
tification on the reverse thereof means
the amount of money actually disbursed
to or for the account of the borrower.

§ 36.4229 Disposition of papers. The
original application for guaranty and the
appraisal report will be retained in the
files of the Veterans Administration.
The Loan Guaranty Certificate and all
other papers will be forwarded to the
proposed lender with instructions as to
closing the loan in a manner to make
the guaranty effective.
§ 36.4230 Loan procedure after ap­
proval of guaranty. Upon receipt of the
papers from the Administrator, the
lender shall:
(a) Satisfy himself by title certificate
as defined in these regulations as to the
title to the real estate to be encumbered
and satisfy himself in such reasonable
manner as may be available as to the
title to personal property to be encum­
bered.
(b) Cause all necessary instruments to
be properly signed and those to be filed,
or filed and recorded, properly witnessed,
acknowledged or proved so as to entitle
them to filing or recordation.
(c) Disburse all funds in substantial
accord with the proposed loan closing
statement submitted with the applica­
tion. (See § 36.4225.)
(d) File with the proper State, County
or other public official, to be retained
where required, or recorded and re­
turned, the “ mortgage”, and any other

appropriate instrument which under the
law of the State is required or permitted
to be filed or recorded for the purpose
of establishing a valid lien as between the
parties, or third persons, or of giving
actual or constructive notice of the
“ mortgage” , pledge, hypothecation, or
other transaction.
(e)
Take possession or do any other
necessary act to make effective the
pledge, or hypothecation, if any.
§ 36.4231 Report of closing loan, (a)
Within two months after closing the
loan and filing with the appropriate
public official of the proper instruments,
or the taking of other appropriate steps,
if any, to make the lien effective, the
lender shall complete and forward to
the Administrator (using prescribed
form, if available) a properly signed re­
port of closing the loan stating that:
(1) The disbursement of the amount
named in such report as the principal
of the note has been completed by the
lender which amount may be not more
than 3% in excess of the amount of the
proposed loan as stated in the original
application for guaranty without com ­
plying with the procedure stated in para­
graphs (c) and (d) of this section.
(2) Such disbursements were as esti­
mated on the loan closing statement sub­
mitted with the application, except as
otherwise stated on the reverse side of
the loan c l o s i n g statement.
(See
§ 36.4225.)
(3) The note and the mortgage (or
other security instrument) were prop­
erly executed stating the date, and the
latter was duly acknowledged, witnessed,
or proved so that it was legally eligible
for filing and for recording if appro­
priate; the date and hour when, and
county in which it was properly filed;
and the filing number thereof; or in the
case of a pledge or hypothecation the
necessary possession, or other steps were
taken to make same effective.
(4) The note was dated, (stating the
date thereon), and signed by the debtor;
the actual principal amount thereof, and
the rate of interest provided therein.
(5) The Loan Guaranty Certificate
(stating its L-number) was completed,
and appropriately signed by the lender
and the borrower as therein provided.
(b) If lender is a corporation its cor­
porate seal shall be impressed on such
report.
(c) If the transaction to be closed is
essentially the same as indicated in the
original application except that:
(1)
The amount of the loan actually to
be made is more than 103% of the amount
stated in the application, or (2) personal
property to be acquired differs from that
described but is for the same use or
purpose, and substantially similar in
kind, quality and value, Form 1862, Ap­
plication to Amend Loan Guaranty Cer­
tificate, will be completed and signed in
duplicate.
(d) The lender will forward the origi­
nal and copy of Form 1862, Application to
Amend Loan Guaranty Certificate, to the
“ Agency” , which will recommend ap­
proval or disapproval and forward both
to the Veterans Administration office
which issued the Loan Guaranty Certifi­

cate. Such office will determine whether
to approve the Application to Amend
Loan Guaranty Certificate. Such de­
termination will be based on the original
application, the evidence submitted in or
with the original application, the appli­
cation to amend, the recommendation of
the agency, and such other evidence, if
any, as it considers necessary. Notice of
action will be given as in the case of
original applications. If approved such
approval will be appropriately indicated
on the original, and such original, duly
executed by the Veterans Administra­
tion will be forwarded to the lender. It
may be attached to the original Loan
Guaranty Certificate to evidence amend­
ment thereof as reflected by such “ rider” .

ponement, with the consent of the Ad­
out consent the amount of the guaranty
ministrator, shall not operate to void or
will be reduced proportionately in the
diminish the ultimate liability under the
same manner as if the value of the re­
guaranty. ' Consent is hereby given for
leased property were applied as a credit
the lender to agree to deferring or reduc­
on the unpaid balance of the loan. The
ing payments for not more than six
provisions of this paragraph (e) will not
months on an amortized note but not
be construed to affect the guaranty in
beyond a date six months beyond its
the event of any grant of title or ease­
original maturity, and subject to the
ment that leaves unaffected the lien on
same limitation, not beyond 20 ye'ars
the property affected thereby; or
(f)
Sale by reason of foreclosure of a from date of the note. In no event shall
indulgence or postponement of action
superior lien if the holder of the guar­
authorized by §§ 36.4200 to 36.4251, inclu­
anteed loan secured by a subordinate
sive, impair any right of the creditor to
lien has knowledge of such foreclosure
thereafter proceed within the applicable
sale as much as 10 days prior thereto
statute of limitations period as if there
and fails to notify the Administrator
had been no indulgence or postponement.
of the time and place thereof.

§ 36.4233 When guaranty does not
apply. The guaranty shall not cover
any loss sustained by the creditor as the
result of:
(a) The acceptance by the mortgagee
o f a mortgage on any real or personal
property, title to which is not merchant­
able;
(b) Failure of the mortgagee to pro­
cure a duly recorded lien of the dignity
required by §§ 36.4200 to 36.4251, inclu­
sive; or a lien of such dignity by filing,
without recording, if lawful, or by pledge
or otherwise as required or permitted by
applicable law in the jurisdiction where
the property is situated at the time the
loan is closed;
(c) Failure of the mortgagee to comply
with § 36.4215 with respect to insurance;
(d) A tax sale pursuant to execution,
or otherwise as provided by law, occa­
sioned by nonpayment of taxes accruing
against the mortgaged property after
the date of the mortgage if mortgagee
fails to give notice to the Administrator
of the delinquent taxes at least one
month before such sale;
(e) A release by the creditor of the
lien on any of the real or personal prop­
erty securing the guaranteed loan, or any
part thereof unless the Administrator
consents in writing. Such consent may
be granted if the debt is appropriately
reduced or on such other terms as the
Administrator may determine: Provided,
however, That if the land is sought by a
public authority for highway or other
purposes, consent is hereby given for the
creditor to release without consideration
or for such consideration as he deems
proper and without reference to the Ad­
ministrator, the creditor’s lien on land
without any buildings thereon if the land
so released does not exceed five percent
of the acreage encumbered and does not
exceed $200 in value. The same consent
is hereby given when the release, ease­
ment grant, or other instrument is
sought by a public or private agency, or
person, for the purpose of pipe line, tele­
phone, telegraph or electric transmission
lines: Provided, however, That when such
releases, or grants by the lender for any
one or more of the purposes stated in
this paragraph ( e ) , or otherwise, with or
without specific consent by the Adminis­
trator, shall have decreased the security
as much as five percent in acreage, or
$200 in value, no further releases shall
be executed, without consent of the Ad­
ministrator. If such are executed with­

§ 36.4234 Default, (a) In the event
o f default, not cured, continuing; (1)
three months on an amortized loan
which is secured by a mortgage on real
property; (2) one month on an unamor­
tized loan unsecured, secured by real or
personal property; (3) two months on
an amortized loan which is unsecured or
secured by a lien on personal property,
the creditor may elect to assert claim
under the guaranty, and give notice
thereof to the Administrator.
(b) If any default occasioned by fail­
ure seasonably to pay to the creditor
entitled any amount of principal or in­
terest due him under the contract (not
cured) shall have persisted as long as
six months on the type of loan described
in paragraph (a) (1 ); or three months
on the type described in paragraphs (a)
(2) or (a) (3), the holder of the indebt­
edness shall give notice thereof to the
Administrator notwithstanding the fail­
ure results from payments on advances
as provided in § 38.4218 or from any in­
dulgences of the debtor as provided in
§§ 36.4235 or 36.4241.
(c) (1) The notice shall state the loan
guaranty number if available. If not
available other identifying data shall be
included, such as date and amount of
original obligation, location of Veterans
Administration office that issued the
guaranty and the property encumbered.
(2) In all cases the notice shall state
the name and last known address of the
debtor, of the veteran, and of the cred­
itor, and the date and manner of de­
fault, and amount past due. If he de­
sires, the creditor may also state his
views as to any indulgence that should
be extended.
(3) The notice to the Administrator
shall be mailed by registered mail or per­
sonally delivered in exchange for a writ­
ten receipt within one month after the
expiration of the periods prescribed in
paragraph (b) of this section.

CLAIMS UNDER A GUARANTY

§ 36.4235 Claim on notice of default.
(a) In the notice of default or separately,
then, or later, the creditor may make
claim under the guaranty.
(b) Then or thereafter the creditor
may also give notice of his intention to
foreclose the lien or liens securing the
indebtedness.
(c) The Administrator may approve
the creditor’s request, if any, to postpone
action to press his claim against the
mortgagor, or the property. Such post­

§ 36.4236 Legal action, (a) The cred­
itor shall not begin action in court, or
give notice of sale under a power of sale,
until* the expiration of 30 days after re­
ceipt by the Administrator of the notice
of intention to foreclose. Notwithstand­
ing paragraph (a) of § 36.4234 such
notice may be given at any time after a
default.
(b) (1) If the circumstances require
immediate action to protect the interest
of the creditor or the Administrator, the
Administrator may waive the require­
ment for prior notice if notice of the
action taken is immediately given.
(2) Without limiting the foregoing, the
existence of conditions justifying the
appointment of a receiver for the prop­
erty shall be sufficient excuse for begin­
ning suit without prior notice to the
Administrator if within ten days -after
commencement of the suit or action,
plaintiff gives the Administrator notice
thereof.
(c) Subject to the provisions of this
paragraph (c) the right to repossess
personal property by virtue of law, or any
contract, may be exercised without prior
notice to the Administrator, but he shall
be given notice thereof within ten days
thereafter, and he or the debtor may
exercise any rights of redemption or
other legal rights available under the law
of the jurisdiction within 30 days after
such notice, or such longer period, if any,
as is provided by such law. In any case
the debtor or the Administrator shall be
entitled to a good title to and possession
of such property so repossessed .upon
compliance with the conditions of any
agreement or upon paying or tendering
to the person then in possession thereof
within 30 days after such notice, the un­
paid balance of the debt with interest to
date of tender, and a reasonable sum
in addition to cover expenses of the re­
possession.
§ 36.4237 Notice of suit and subse­
quent sale, (a) Within ten days after
beginning suit or causing notice of sale
without suit to be given, the creditor shall
notify the Administrator thereof by reg­
istered mail or personal delivery in ex­
change for written receipt. The notice
shall state whether the foreclosure will
be by proceeding in court, or under a
power of sale; the type and number of
the suit, if any, and the name and loca­
tion of the court in which pending.
(b) The creditor shall give written
notice to the Administrator by registered

9
mail (or delivery) of any foreclosure
sale, judicial, or under a power of sale;
or of any proposed termination of the
rights of any vendee or his immediate
or remote grantee (assignee) pursuant
to any power or option in a sales con­
tract, or in any other instrument affect­
ing the property which constitutes any
security for the obligation guaranteed.
Such notice shall be given so that it is
received at least thirty days before such
sale or other proposed action. It shall
state the date, hour and place thereof.
The Administrator may bid thereat on
the same terms as the lender or other
bidders, and may exercise any right the
debtor could exercise by virtue of the
contract, or any statute, or otherwise.
This section is applicable whether the
suit, or the sale, or termination, occur
before or after payment of the guaranty.
§ 36.4238 Death of veteran or other
owner, (a) In the event the creditor
has knowledge of the death of the vet­
eran, or of any owner of an interest in
the encumbered property, or the death of
any other person liable on the indebted­
ness which is guaranteed in whole or in
part, the creditor shall take such steps, if
any, as are legally necessary, and reason­
ably available, in the jurisdiction where
the encumbered property is situated, to
avoid loss of the lien, or impairment
thereof, or of all or part of the pro­
ceeds of any sale of the property as a
result of, or incident to, such death, or
of any probate proceedings thereby oc­
casioned in said jurisdiction.
(b) In addition to protecting the lien
rights as required by paragraph (a) of
this section, the creditor at his discre­
tion may proceed in probate, or other­
wise, as may be permissible and feasible
in any jurisdiction where administration
proceedings are pending or properly may
be instituted, or other appropriate legal
action taken against assets or persons, to
assert any rights, by means of any reme­
dies, therein available to a similarly sit­
uated creditor of the decedent.
(c) Upon direction of the Administra­
tor and his designation of an accessible
attorney for the purpose, and making ap­
propriate provisions for advancing or
paying the costs and expenses of the pro­
ceeding, the creditor shall proceed as
provided in paragraph (b) of this sec­
tion: Provided, however, That in any
case the Administrator may, at his option,
proceed immediately in respect to pro­
tecting the lien, or asserting claim as con­
templated by paragraph (b) of this sec­
tion, or as to both remedies. If the Ad­
ministrator takes action, it may be in
his name or the name of the creditor as
the Administrator may elect and as may
be appropriate under applicable law. If
action is taken by the Administrator he
shall seasonably notify, the creditor
thereof.
vd) Nothing in this section shall im ­
pair any right of set-off or other right
or remedy of the Administrator.
§ 36.4239 Death or insolvency of cred­
itor. (a) Immediately upon the death
of the creditor and without the neces­
sity of request or other action by the
debtor or the Administrator, all sums
then standing as a credit balance in a

“ trust,” or “ deposit,” or other account
to cover taxes, insurance accruals, or
other items in connection with the loan
secured by the encumbered property,
whether stated to be such or otherwise
designated, and which have not been
credited on the note shall, nevertheless,
be treated as a set-off and shall be
deemed to have been credited thereon
as of the date of the last debit to such
account, so that the unpaid balance of
the note as of that date will be reduced
by the amount of such credit balance:
Provided, however, That any unpaid
taxes, insurance premiums, rents, or ad­
vances may be paid by the holder of the
indebtedness, at his option, and the
amount which otherwise would have
been deemed to have been credited on
the note reduced accordingly. This sec­
tion shall be applicable whether the
estate of the deceased creditor is solvent
or insolvent.
(b) The provisions of paragraph (a)
of this section shall also be applicable in
the event o f :
(1) Insolvency of creditor;
(2) Initiation of any bankruptcy or
reorganization, or liquidation proceed­
ings as to the creditor, whether volun­
tary or involutary;
(3) Appointment of a general or ancil­
lary receiver for the creditor’s property;
or, in any case
(4) Upon the written request of the
debtor if all secured and due insurance
premiums, taxes, and ground rents have
been paid, and appropriate provisions
made for future accruals.
(c) Upon the occurrence of any of the
events enumerated in paragraph (a) or
(b) of this section interest on the note
and on the credit balance of the “ deposit”
mentioned in paragraph (a) shall be set­
off against each other at the rate payable
on the principal of the note, as of the
date of last debit to the deposit account.
Any excess credit of interest shall be
treated as a set-off against the unpaid
advances, if any, and the unpaid balance
of the note.
(d) The provisions of paragraphs (a ),
(b ), and (c) of this section shall apply
also to corporations. The dissolution
thereof by expiration of charter, by for­
feiture, or otherwise shall be treated as
in the death of an individual as provided
in paragraph (a).
§ 36.4240 Filing claim under guaranty.
Claim under the guaranty may be made
on Form 1864, Claim under the Guar­
anty. Subject to the limitation that
the total amount payable under the
guaranty shall in no event exceed the
original amount thereof, the amount
payable under the guaranty shall be the
percentage of the indebtedness originally
guaranteed applied to the indebtedness
(as defined in § 36.4200 (m )) computed
as of the date of the claim, and reduced
by any payments theretofore made by the
United States pursuant to the guaranty.
§ 36.4241' Options available to admin­
istrator. Upon receipt of claim under the
guaranty or notice of intention to fore­
close, the Administrator shall have the
following options:
(a) Pay to the creditor not later than
one month after receipt of notice of any

default, as a partial payment of any
actual or potential claim under the guar­
anty, the amount of principal, interest,
taxes, advances or other items in default;
and in consideration of such payment
the lender shall be deemed to have agreed
to refrain from giving effect to any ac­
celeration provisions by reason of de­
faults prior to the date of notice of de­
fault theretofore given: Provided, how­
ever, That unless the creditor consents,
the Administrator may exercise this op­
tion once only, and in an amount not
exceeding an amount equivalent to the
aggregate of principal and interest pay­
able in one year, or not exceeding ten
per centum of the original amount of the
guaranty, whichever sum is less.
(b) Pay the creditor within one month
after receipt of claim the full amount
payable under the guaranty without re­
quiring foreclosure, or personal action.
(c) Pay to the creditor promptly after
receipt of claim any amount agreed
upon, not exceeding the amount due
under the guaranty; and notify him to
institute appropriate foreclosure pro­
ceedings, with, or without, legal action
to reduce the debt to judgment, against
all or any of the parties liable thereon,
and whose names are stated in such no­
tice to the creditor.
(d) If the creditor does not begin ap­
propriate action within two months after
receipt of notice to institute action as
provided in paragraph (c) above, the
Administrator shall be entitled to begin
and prosecute the same to completion in
the name of the creditor, or of the Ad­
ministrator on behalf of the United
States, as may be appropriate under ap­
plicable laws and rules of procedure:
Provided, however, That in such event
the Administrator shall pay (in advance
if required under the practice in the ju ­
risdiction) all court costs, and other ex­
penses, and provide the legal services
required.
§ 36.4242 Refinancing and extension
o f guaranty, (a) When the Adminis­
trator shall have received notice from
the creditor that he intends to institute
foreclosure proceedings, the Administra­
tor shall be entitled to obtain a refinanc­
ing which will prevent the consumma­
tion of the foreclosure sale. Nothing
herein shall be construed to require a
creditor to lend money for such refinanc­
ing.
(b) If refinanced in any manner the
Administrator may continue in effect the
guaranty granted with respect to the
previous loan in such manner as to cover
the loan which effected the refinancing.
(c) The Administrator in appropriate
cases shall be entitled to exercise any
redemption rights of a debtor, or a cred­
itor, in connection with the loan guar­
anteed, or property rights arising out of,
or incident to, such loan.
§ 36.4243
Subrogation.
(a)
Any
amounts paid to the creditor by the Ad­
ministrator pursuant to the guaranty
shall constitute a debt due to the United
States by the veteran on whose appli­
cation the guaranty was made; and by
his estate upon his death. The Admin­
istrator is subrogated to the contract

10
and the lien rights of the creditor to
the extent of such payments, but junior
to the creditor’s rights as against the
debtor or the encumbered property,
until the creditor shall have received the
full amount payable under his contract
with the debtor. No partial or complete
release by the creditor of the debtor or
of the lien shall impair any rights of
the Administrator, by virtue of the lien,
or otherwise.
(b) The creditor, upon request, shall
execute, acknowledge and deliver an ap­
propriate instrument tendered him for
that purpose, evidencing any payment
received from the Administrator and the
Administrator’s resulting right of sub­
rogation.
§ 36.4244 Future action against mort­
gagor. In addition to the amount, if
any, collected from the proceeds of the
encumbered property by reason of the
right of subrogation, the United States
will collect from the veteran, or his
estate, by set-off against any amounts
otherwise payable to the veteran or his
estate; or in any other lawful manner,
any sums disbursed by the United States
on account of the claim pursuant to the
guaranty.
§ 36.4245 Suit by Administrator, (a)
Whenever pursuant to §§ 36.4200 to
36.4251, inclusive, the Administrator in­
stitutes, or causes to be instituted by the
creditor, or otherwise, any suit in equity;
action at law; or probate proceedings or
the filing of a claim in such; or other
legal or equitable proceedings of any
character, or any sale, in court or pur­
suant to any power of sale, the person or
persons promptly instituting the same
(including the Administrator) shall be
entitled to recoup from any proceeds
realized therefrom any expenses reason­
ably incurred, including trustee fees,
court costs, and attorney fee paid (or
the reasonable value of the services of the
trustee and of the attorney, if performed
by salaried person or persons, or by the
party himself, when proper).
(b) The net proceeds, after setting off
such items that may properly be re­
couped, shall be credited to the indebted­
ness, or otherwise as may be proper under
the facts.
(c) In determining the propriety of
recoupment and the amount thereof con­
sideration shall be given to any provisions
in the note or mortgage relating to such
items, and any amounts actually realized
pursuant thereto.
§ 36.4246 Creditor’s records and re ­
ports required, (a) The creditor shall
maintain a record of the amounts of pay­
ments received on the obligation and dis­
bursements chargeable thereto, and the
dates thereof. Any creditor who fails to
maintain such record shall be presumed
to have received on the dates due all sums
which by the terms of the contract are
payable prior to date of claim for default,
and the burden of going forward with
evidence and of ultimate proof of the
contrary shall be on such creditor; not
on. the debtor, or the United States.
(b) On any delinquent loan the credi­
tor shall report annually on the anni­
versary of the earliest unremedied de­

P art 46— R egulations U nder S ervice­
fault any amount received or disbursed
men ’ s R eadjustment A ct of 19441
the unpaid balance of principal and ac­
crued interest and any other items
GUARANTY OF LOANS (H O M E )
chargeable; and the nature of any de­
faults not already reported. He shall
The following changes are made to the
include such additional information, if
regulations governing the guaranty of
reasonably necessary and obtainable,
loans under Title III of the Servicemen’s
which may from time to time be re­
Readjustment Act of 1944:
quested by the Administrator.
(c)
A proposed lender may be required
1. Paragraph (v) is added to § 36.4000,
to submit evidence satisfactory to the
as follows;
Administrator of his equipment for
maintenance of adequate records on, and
§ 38.4000. Definitions. * * *
his ability to service, loans if guaranteed
(v) “ Interest” means the compensa­
pursuant to the provisions of the act and
tion fixed by law, or by the parties to a
§§ 36.4200 to 36.4251, inclusive.
contract, for the use or detention of, or
forbearance with respect to money, ir­
§ 36.4247 Failure to supply informa­
tion. Failure to supply any available in­
respective of the name applied to such
compensation.
formation required by §§ 36.4200 to
36.4251, inclusive, within two months
2. In § 36.4012, paragraph (b) is
after request therefor will entitle the Ad­
amended to read as follows:
ministrator to obtain such information
otherwise, and the expense qf so obtain­
§ 36.4012 Repayment provisions. * * *
ing it, plus ten dollars to cover estimated
(b) If the mortgagor consents the
overhead expenses, shall be chargeable to
mortgage may provide that each monthly
the creditor who failed to comply with
or other periodical payment shall include
such request.
in addition to the proper amount to be
§ 36.4248 Notice to Administrator.
credited to principal and interest a pro­
Any notice required by §§ 36.4200 to
portionate part of the estimated amounts
36.4251, inclusive, to be given the Ad­
required annually for all taxes, ground
ministrator shall be sufficient if in writ­
rents if any, special assessments if any,
ing, and delivered at, or mailed to, the
and fire and other hazard insurance pre­
Veterans Administration office at which
miums. Such provisions may direct the
the application for guaranty was ap­
method of crediting the- additional
proved or to any changed address of
amounts included in the periodical pay­
which the creditor has been given notice
ments for the purposes stated in this
or, at the option of the creditor, to the
paragraph.
central office of the Veterans Adminis­
tration, Washington 25, D. C. If mailed
3. Paragraph (i) is added to § 36.4025,
the notice shall be by registered mail
as follows:
when so provided by §§ 36.4200 to 36.4251,
inclusive.
§ 36.4025 Papers required. * * *
(1) When applicable, the original and
§ 36.4249 Right to inspect books. The
copy (both signed) of Form No. 1862,
Administrator has the right to inspect, at
Application to Amend Loan Guaranty
a reasonable time and place the papers
Certificate, (see § 36.4031 (c) and (d )) .
and records pertaining to the loan and
guaranty. If permission to inspect is
4. Paragraph (c) is added to § 36.4027,
declined the Administrator may enforce
as follows:
the right by subpoena under the provi­
sions of Title III of Public No. 844, 74th
§ 36.4027 Administrator’s action on
Congress, 49 Stat. 2031-35, 38 U.S.C. 131,
application. * * *
or in any other lawful manner.
(c) (1) If for any reason the loan
§ 36.4250 Forms, construction to be
transaction is not concluded and the
placed on reference to. All references in
same or another lender thereafter wishes
§§ 36.4200 to 36.4251, inclusive, to Form
to consider making a loan on the same
1800, Certification of Eligibility, or to
security described in the original applica­
other form numbers shall be construed to
tion, a supplemental application, if the
include any revision of the same forms,
same lender, or a new application if a
identified by the same, or by different
different lender, may be submitted. If
numbers.
accompanying it is a statement by the
§ 36.4251 Disqualified lenders and bid­
borrower and lender that the condition
ders. Except under unusual circum­
of the security is substantially the same
stances and upon prior approval by the
as when the appraisal report was made,
Administrator an application for guar­
the supplemental or new application may
anty of a loan will not be approved if the
be approved without a new appraisal, if
lender is known to be an employee of the
the supplemental or new application
Veterans Administration or of the
shall have been received by the Admin­
Agency; and without such approval, an
employee of either may not bid at a fore­
istrator within three months from the
closure sale of the security for a guaran­
date of the appraisal report.
teed loan.
(2) Without reference to the time limit
stated in subparagraph (1) of this sec­
[ seal]
F rank T. H ines,
Administrator of Veterans’ Affairs.
tion, a copy of the appraisal report will
D e c e m b e r 20, 1944.
[F. R. Doc. 44-19317; Filed, Dec. 21, 1944;
3 :58 p. m .J

1As printed in the F ederal R egister,
Volume 9, Number 256, Washington, Sat­
urday, December 23, 1944.

11
be supplied without cost to a prospective
new lender or to the original proposed
lender at the currently prescribed price
for a copy.
5. In § 36.4028 the existing text is
designated (a) and paragraphs (b) and
(c) are added as follows:
§ 36.4028 Execution and form of guar­
anty. (a) * * *
(b) The word principal as used in the
Loan Guaranty Certificate and the cer­
tification on the reverse thereof means
the amount of money actually disbursed
to or for the account of the borrower.
(c) The certification by borrower and
lender in paragraph III B (3) of the Loan
Guaranty Certificates as printed in
§ 36.4028 shall be deemed to be correct,
notwithstanding that the guaranteed
loan is secured by a second lien, if, but
only if, such is permissible under the
regulations and the facts of the case, and
if the application for guaranty indicates
that the loan is to be secured by a second
lien.
6. In § 36.4031, paragraph (a) (1) is
amended and paragraphs (c) and (d)
are added, as follows:
§ 36.4031 Guaranty when effective.
(a) * * *
(1) The disbursement of the amount
named in such report as the principal of
the loan has been completed by the
lender, which amount may be not more
than 3 % in excess of the amount of the
proposed loan as stated in the original
application for guaranty, without com­
plying with the procedure stated in para­
graphs (c) and (d) of this section.
*

*

*

*

*

(c) If the transaction to be closed is
essentially the same as indicated in the
original application except that:
(1) The amount of the loan actually
to be made is more than 103% of the
amount stated in the application, or
(2) Personal property to be acquired
differs from that described but is for
the same use or purpose and substantially
similar in kind, quality and value, Form
1862, Application to Amend Loan Guar­
anty Certificate, will be completed and
signed in duplicate.
(d) The lender will forward the orig­
inal and copy of Form 1862, Application
to Amend Loan Guaranty Certificate, to
the “Agency” , which will recommend ap­
proval or disapproval and forward both
to the Veterans Administration office
which issued the Loan Guaranty Cer­
tificate.
Such office will determine
whether to approve the Application to
Amend Loan Guaranty Certificate. Such
determination will be based on the orig­
inal application, the evidence submitted
in or with the original application, the
application to amend, the recommenda­
tion of the Agency, and such other evi­
dence, if any, as it considers necessary.
Notice of action will be given as in the
case of original applications. If ap­
proved such approval will be appropri­
ately indicated on the original, and such
original, duly executed by the Veterans
Administration will be forwarded to the
lender. It may be atached to the orig­

inal Loan Guaranty Certificate to evi­
dence amendment thereof as reflected by
such “ rider” .
7. In § 36.4032, paragraphs (a ), (b)
(3), (e) and (g) are amended, and para­
graph (i) is added, as follows:
§ 36.4032 Construction l o a n s ,
(a)
Upon the submission to an agency of an
application made pursuant to section
501 (a) or 505 (a) of the act for the
guaranty o f a loan for the construction
of a dwelling on unimproved property
owned by the veteran, or under section
501 (b) for construction involving alter­
ations or improvements, the guaranty
will be issued to become effective only
upon completion of the construction
project, and upon fulfillment of the same
requirements of this part as are appli­
cable to the guaranty of loans for the
acquisition of homes other than by con­
struction.

if same are not of a major character and
in the aggregate do not increase or de­
crease the cost more than five per centum
of the contract price. This does not
modify the provisions of § 36.4031.
Changes or substitutions other than as
herein stated must have the approval of
the Administrator.
8. Paragraph (a) of § 36.4033 is
amended, and paragraphs (e) and (f)
are added as follows:
§ 36.4033
anteed. *

Losses which are not guar­
* *

(a) The acceptance by the mortgagee
of a mortgage on any property, title to
which is not merchantable;
*
*
*
*
*

(e) A release by the creditor of the lien
on any of the real or personal property
securing the guaranteed loan, or any
part thereof, unless the Administrator
(3)
There is issued by the Adminis­ consents in writing. Such consent may
be granted if the debt is appropriately
trator Form 1863, Approval of Escrow
reduced or on such other terms as the
Certificate, which may be attached to
Administrator may determine: Provided,
the loan guaranty certificate.
however, That if the land is sought by a
*
*
*
*
*
public authority for highway or other
(e)
Except where the construction purposes, consent is hereby given for the
shall have been inspected and approved
creditor to release without considera­
and completion certified by a Federal
tion or for such consideration as he
Agency making or guaranteeing or in­
deems proper and without reference to
suring the principal loan on such prop­
the Administrator, the creditor’s lien on
erty, as contemplated by section 505 (a)
land without any buildings thereon if
of the act, the Loan Guaranty Certifi­
the land so released does not exceed five
cate shall become effective upon the con­
per cent of the acreage encumbered and
dition, in addition to those set forth in
does not exceed $200 in value. The same
§ 36.4030, that there be supplied to the
consent is hereby given when the release,
Administrator a statement by an ap­
easement grant, or other instrument is
praiser on Form 1803 (a), Statement by
sought by a public or private agency, or
Appraiser on Completion of New Con­
person, for the purpose of pipe line, tele­
struction,
phone, telegraph or electric transmission
(1) He has inspected the construction,
lines; Provided, however, That when such
repairs, alterations, or improvements.
releases, or grants by the lender for any
(2) The same have been constructed
one or more of the purposes stated in
and completed in substantial conformity
this paragraph, or otherwise, with or
with the contract, the plans and specifi­
without specific consent by the Adminis­
cations (if any), and any authorized
trator, shall have decreased the security
changes therein (if any), permitted by
as much as five per cent in acreage, or
these regulations, or, in those cases em­
$200 in value, no further releases shall
braced in § 36.4024 (c) or § 36.4024 (e)
be executed, without consent of the Ad­
there are no plans and specifications,
ministrator. If release of lien is executed
within good building practices.
contrary to the provisions of these regu­
(3) Th6 increased value of the prop­
lations the amount of the guaranty will
erty as completed and which will be en­
be reduced proportionately in the same
cumbered is substantially in accord with
manner as if the value of the released
his estimate.
property were applied as a credit on the
*
*
*
*
*
unpaid balance of the loan. The pro­
(g)
Upon compliance with the re­ visions of this paragraph will not be con­
quirements of this section and of
strued to affect the guaranty in the event
of any grant of title or easement that
§§ 36.4030 and 36.4031 relating to the
leaves unaffected the lien on the prop­
guaranty becoming effective in other
erty affected thereby; or
than construction loan cases, said Loan
Guaranty Certificate shall become effec­
(f) Sale by reason of foreclosure of a
tive as originally executed (and subject
superior lien if the holder of the guaran­
to § 36.4031), or as amended pursuant
teed loan secured by a subordinate lien
to approval of application therefor on
has knowledge of such foreclosure sale
as much as 10 days prior thereto and
Form 1862, Application to Amend Loan
fails to notify the Administrator of the
Guaranty Certificate. (See § 36.4031 (c)
time and place thereof.
and (d ).)
*
*
*
*
*
9. Section 36.4040 is amended to read
(i) Minor changes may be made in the
as follows:
plans and specifications or substitution
§ 36.4040 Filing claim under guaranty.
of material of substantially equal qual­
Claim under the guaranty may be made
ity or value, as the creditor, the debtor,
on Form 1864, Claim under the Guaranty.
and the builder (contractor) may agree

(b j

^ ^

12
Subject to the limitation that the total
amount payable under the guaranty shall
in no event exceed the original amount
thereof, the amount payable under the
guaranty shall be the percentage of the
indebtedness originally guaranteed ap­
plied to the indebtedness (as defined in
§ 38.4000 ( m) ) , computed as o f the date
-o f the claim, and reduced by any pay­
ments theretofore made by the United
States pursuant to the guaranty.
10. In § 36.4041, the text immediately
preceding paragraph (a) is amended to
read as follows:
§ 36.4041 Options available to Admin­
istrator. Upon receipt of claim under the
guaranty, or notice of intention to fore­
close, the Administrator shall have the*
following options:
11. Sections 36.4050 and 36.4051 are
amended to read as follows:
§ 36.4050 Forms, construction to be
placed on reference to. All references in

the regulations to Form 1800, Certifica­
tion of Eligibility, or to other form num­
bers shall be construed to include any
revision of the same forms, identified by
the same, or by different numbers.
§ 36.4051 Disqualified lenders and
bidders. Except under unusual circum­
stances and upon prior approval by the
Administrator an application for guar­
anty of a loan will not be approved if
the lender is known to be an employee
of the Veterans Administration or of the
Agency; and without such approval, an
employee of either may not bid at a fore­
closure sale of the security for a guaran­
teed loan.

GUARANTY OF LOANS ON FARM S
E Q U IPM EN T

AND

FARM

Section 36.4128 (b) is amended to read
as follows:
§ 36.4128 Execution and form of guar­
anty. * * *
(b) The word principal as used in the
Loan Guaranty Certificate and the cer­
tification on the reverse thereof means
the amount of money actually disbursed
to or for the account of the borrower.
(58 Stat. 284)
[ seal]

F rank T. H ines,

Administrator.

(58 Stat. 284)
[ seal]

P art 38— R egulations U nder S ervice­
men ’ s R eadjustment A ct of 19441

F rank T. H ines,

. Administrator of Veterans Affairs.
D ecember 20, 1944.
[F. R. Doc. 44-19315; Filed, Dec. 21, 1944;
3:57 p. m.]

D ecember 8, 1944.
- [F. R. Doc. 44-19316; Filed, Dec. 21, 1944;
3:57 p. m.]
1As printed in the F ederal R egister,
Volume 9, Number 256, Washington, Sat­
urday, December 23, 1944.