BVA9501982 DOCKET NO. 93-06 263 ) DATE ) ) On appeal from the decision of the Department of Veterans Affairs Regional Office in Cleveland, Ohio THE ISSUE Restoration of full loan guaranty entitlement. WITNESS AT HEARING ON APPEAL Appellant ATTORNEY FOR THE BOARD Christopher P. Kissel, Associate Counsel INTRODUCTION This case comes before the Board of Veterans' Appeals (the Board) on appeal from a decision of the Cleveland, Ohio, Department of Veterans Affairs Regional Office (VARO). The Board may not adjudicate the appellant's claims alleging violations of his due process rights protected under the Fifth Amendment of the United States Constitution. See Appellant's Brief, Issues II and III, pgs. 4, 10 (September 17, 1994). The jurisdiction of the Board to decide a particular issue on appeal is limited, as set forth under its Rules of Practice. 38 C.F.R. § 20.101(a) (1993). His claims alleging that his property interests in the subject property, in essence a right of redemption, and in the full restoration of his entitlement to loan guaranty benefits, were violated when VA failed to inform him of the transferee's default, impending foreclosure, and acceptance of deed in lieu of foreclosure, and, as a result of such violations, he is entitled to monetary damages from the government in the amount of $58,620, simply do not fall within the jurisdictional scope of the Board. Consequently, the only issue that will be considered by the Board is the one that is currently certified for appellate review, restoration of full loan guaranty entitlement under Title 38 of the United States Code and applicable regulatory provisions. CONTENTIONS OF APPELLANT ON APPEAL The appellant contends, in substance, that his entitlement to full loan guaranty privileges should be restored in order not to continue to punish him because of an old invalid debt. DECISION OF THE BOARD The Board, in accordance with the provisions of 38 U.S.C.A. § 7104 (West 1991), has reviewed and considered all of the evidence and material of record in the veteran's claims file(s). Based on its review of the relevant evidence in this matter, and for the following reasons and bases, it is the decision of the Board that the appellant is not entitled to restoration of his loan guaranty entitlement until the loss sustained by the government is repaid. FINDINGS OF FACT 1. In September 1978, the appellant purchased a house using a home loan which was guaranteed, in part, by VA. 2. The record reflects that in 1979, the appellant conveyed his interest in the house on an assumption basis to [redacted], without benefit of release of liability. 3. Starting in July 1981, the transferee, [redacted], defaulted on the loan payments. Mortgage foreclosure proceedings were initiated in September 1981. 4. In February 1982, VA accepted the transferee's request for a deed-in-lieu of foreclosure. The VA's acceptance of the deed-in- lieu of foreclosure resulted in a conveyance of the subject property to VA. 5. In February 1983, VA paid the lender's loan guaranty claim, resulting in a loss to the government in the amount of $5,539.67. 6. In January 1990, VARO informed the appellant that he was not indebted to the VA for the amount paid on the loan guaranty claim. 7. The VA's loss of the loan guaranty claim payment has not been repaid. CONCLUSION OF LAW Restoration of loan guaranty entitlement is not available to the appellant until the loss which the Secretary of Veterans Affairs sustained in connection with the loan is repaid. 38 U.S.C.A. § 3702(b) (West 1991). REASONS AND BASES FOR FINDINGS AND CONCLUSION Initially, the Board finds that the appellant has submitted evidence which is sufficient to justify a belief that his claim is well grounded. 38 U.S.C.A. § 5107(a) (West 1991) and Murphy v. Derwinski, 1 Vet.App. 78 (1990). Furthermore, in the opinion of the undersigned, this case has been adequately developed for appellate purposes by VARO which allows the Board to proceed to a disposition on the merits. The appellant is seeking restoration of full entitlement to loan guaranty benefits. 38 U.S.C.A. § 3702 (West 1991). He has also raised a number of constitutional claims alleging violations of his due process rights under the Fifth Amendment of the U. S. Constitution; however, for the reasons cited above in the Introduction, the Board must decline appellate consideration of those claims. The computation of loan guaranty entitlement is governed by statute and regulation, and begins with an amount based on the type of realty and/or the principal loan amount. Where entitlement has previously been used, the amount used is subtracted from the full guaranty provided by regulation. If the property has been disposed of, but VA has suffered a loss on the loan, the amount of the loss may not be excluded from the computation until repaid in full. 38 U.S.C.A. § 3702(b)(1) (West 1991); 38 C.F.R. § 36.4302(d)(2) and (i)(1)(2)(1993). The statute reads as follows: In computing the aggregate amount of guaranty or insurance housing loan entitlement available to a veteran under this chapter, the Secretary may exclude the amount of guaranty or insurance housing loan entitlement used for any guaranteed, insured or direct loan, if- (1)(A) the property which secured the loan has been disposed of by the veteran or has been destroyed by fire or other natural hazard; and (B) the loan has been repaid in full, or the Secretary has been released from liability as to the loan, or if the Secretary has suffered a loss on such loan, the loss has been paid in full; .... The appellant became obligated under the terms of a home loan which was guaranteed, in part, by VA, when he purchased a house in Chesapeake, OH, in September 1978; however, he conveyed his interest in the house to the transferee, Mr. [redacted], who then subsequently defaulted on the mortgage payments. In February 1982, VA accepted a deed-in-lieu of foreclosure from the transferee and the subject property was reconveyed to VA. A claim was subsequently paid by VA under its loan guaranty to the lender, resulting in a loss to the Government in the amount of $5,539.67. In November 1989, the appellant applied for his available loan guaranty entitlement; however, he was informed by VARO that although he was not liable for the amount paid on the aforementioned claim, entitlement to full benefits under VA's loan guaranty program could not be restored until the amount of the loss was paid in full. This appeal followed. After having considered the substantive and procedural history of this case, the appellant's contentions, and the applicable law and regulations, the Board has concluded that the appellant should not be granted restoration of his entitlement to VA home loan benefits until such time as the loss to the Department of Veterans Affairs has been recovered. The Board emphasizes that a distinction must be made between no "debt" to the veteran and the "loss" to the VA. It follows that the unenforceability of collection of the debt does not, in itself, serve to reinstate full entitlement to loan guaranty benefits. In general, individuals are obligated to repay the Government for any loan guaranty claim payments. 38 C.F.R. § 36.4323(e) (1993). While an obligation to repay the loan guaranty may be eliminated by means of a number of mechanisms, including a finding that VA failed to comply with due process requirements under 38 U.S.C.A. § 3732 (West 1991), the Secretary's loss must be repaid in order for the appellant's loan eligibility to be restored, even if the debt has been eliminated. 38 U.S.C.A. § 3702(b)(1) (West 1991). 38 U.S.C.A. § 3702(b) also contains a provision which states that "[t]he Secretary may, in any case involving circumstances the Secretary deems appropriate, waive one or more of the conditions prescribed in clause (1) ...." However, it is the established policy of the VA, based on the law and regulations, that waiver will be appropriate only in unusual situations involving catastrophic loss to a veteran, such as natural disasters. Accordingly, the waiver provisions found in the last sentence of section 3702(b) are not for application in this case. To date, the Department has not promulgated regulations providing for "waiver" in cases where a debt is found to be invalid owing to failure by the VA to provide notice. Our findings regarding the loss repayment requirement, and the waiver provision, are supported by the legislative history of section 3702(b) as presently constituted. See S. Rep. No. 93- 1334, 93d Cong., 2d Sess. (1974) at 20, 21, 30, 31. The undersigned therefore concludes that the appellant's entitlement to VA loan guaranty benefits may not be restored until the Secretary's loss is made good. ORDER Restoration of loan guaranty entitlement is denied. KENNETH R. ANDREWS, JR. Member, Board of Veterans' Appeals (CONTINUED ON NEXT PAGE) The Board of Veterans' Appeals Administrative Procedures Improvement Act, Pub. L. No. 103-271, § 6, 108 Stat. 740, ___ (1994), permits a proceeding instituted before the Board to be assigned to an individual member of the Board for a determination. This proceeding has been assigned to an individual member of the Board. NOTICE OF APPELLATE RIGHTS: Under 38 U.S.C.A. § 7266 (West 1991), a decision of the Board of Veterans' Appeals granting less than the complete benefit, or benefits, sought on appeal is appealable to the United States Court of Veterans Appeals within 120 days from the date of mailing of notice of the decision, provided that a Notice of Disagreement concerning an issue which was before the Board was filed with the agency of original jurisdiction on or after November 18, 1988. Veterans' Judicial Review Act, Pub. L. No. 100-687, § 402 (1988). The date which appears on the face of this decision constitutes the date of mailing and the copy of this decision which you have received is your notice of the action taken on your appeal by the Board of Veterans' Appeals.