220 F.3d 1375 (Fed. Cir. 2000), 99-7109, Mortage Investors Corp. v Gober

Docket Nº:99-7109
Citation:220 F.3d 1375
Party Name:MORTGAGE INVESTORS CORPORATION OF OHIO, Petitioner, v. Hershel W. Gober, ACTING SECRETARY OF VETERANS AFFAIRS, Respondent.
Case Date:August 11, 2000
Court:United States Courts of Appeals, Court of Appeals for the Federal Circuit
 
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Page 1375

220 F.3d 1375 (Fed. Cir. 2000)

MORTGAGE INVESTORS CORPORATION OF OHIO, Petitioner,

v.

Hershel W. Gober, ACTING SECRETARY OF VETERANS AFFAIRS, Respondent.

99-7109

United States Court of Appeals, Federal Circuit

August 11, 2000

Appealed from: Department of Veterans Affairs

Page 1376

Steven C. Dupre', Carlton, Fields, Ward, Emmanuel, Smith & Cutler, P.A., of St. Petersburg, Florida, argued for petitioner. With him on the brief was Jill H. Bowman.

Gerald M. Alexander, Attorney, Commercial Litigation Branch, Civil Division, Department of Justice, of Washington, DC, argued for respondent. With him on the brief were David W. Ogden, Assistant Attorney General; David M. Cohen, Director; andMark A. Melnick, Assistant Director.

Before NEWMAN, RADER, and LINN, Circuit Judges.

RADER, Circuit Judge.

Mortgage Investors Corporation of Ohio (MIC), a private corporation which specializes in refinancing government-secured Federal Housing Administration (FHA) or Veterans Administration {VA} loans, petitions this court for direct review of a modification of a Department of Veterans Affairs (DVA) rule, Loan Guaranty: Requirements for Interest Rate Reduction Refinancing Loans, RIN 2900-A192, 64 Fed. Reg. 19906 et seq., (Apr. 23, 1999). This court has original subject matter jurisdiction to review this rule under 38 U.S.C. § 502 (1994). The rule governs some aspects of DVA's Interest Rate Reduction Refinancing Loan (IRRRL) Program, 38 U.S.C. § 3710 (1994). MIC challenges the new rule's sufficiency under the Administrative Procedure Act (APA), 5 U.S.C. § 553 (1994). This court finds the new rule to be neither arbitrary nor capricious, and DVA to have followed the APA's procedural requirements.

I.

Under 38 U.S.C. § 3703 (1994), DVA can guarantee a percentage of a veteran's private mortgage loan. The IRRRL program continues that guarantee when the veteran refinances the loan to obtain a lower interest rate. Before the rule change, no DVA review or approval was required for refinancing if the original loan was not more than three monthly payments past due.

On October 8, 1997, DVA announced a change in the three-payment rule by publishing an "interim final rule." The "interim final rule" stated that DVA approval was not required for an IRRRL refinancing if the loan was "current," i.e., not

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"delinquent." Further, except in certain circumstances, the rule required that the refinancing had to reduce the veteran's new loan payment. The "interim final rule" did not define the terms "current" and "delinquent." Nonetheless, the rule made clear that the veteran could not skip any monthly loan payments before the refinancing, and effectively converted the three-payment grace period into a one-payment grace period.

DVA sought to change the rule because "a small number of lenders ha[d] been urging veterans to apply for loans under conditions that increase[d] the risk of loss to both the veteran and the Government." 62 Fed. Reg. 52503 (Oct. 8, 1997). DVA asserted that in some cases refinancers had added "exorbitant costs" to loans, while the borrowers benefited by only a very small interest rate reduction. See id. at 52503-04. DVA determined that lenders had encouraged veterans to skip payments on the old loan and use the savings to pay the costs of the new loan, or for some other purpose. See id. As a result of these practices, some veterans had experienced an increase in their monthly payment notwithstanding the new loan's lower interest rate. See id.

As published, the new rule was to be effective upon publication, but DVA solicited public comment until December 8, 1997. MIC filed a petition for judicial review and injunctive relief in this court on November 20, 1997. DVA rescinded the interim final rule on December 1, 1997, making MIC's petition moot.

On June 3, 1998, DVA published a "proposed rule," which was similar to its earlier interim final rule. Again the proposed new rule reduced the three-month grace period to one month. This proposed rule set no effective date and solicited comments from interested parties until August 3, 1998. DVA also noted that it would take account of comments it had already received on the interim final rule in its consideration of the new proposed rule. This proposed rule defined a "delinquent" loan as any loan whose scheduled monthly payment was more than thirty days past due. See 63 Fed. Reg. 30163 (June 3, 1998).

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