If the requirement is not met, the loan cannot be guaranteed
Finally, VA considered whether a Type I Cash-Out would need to pass a net tangible benefit test to comply with the law or whether the net tangible benefit test is merely a disclosure for informational purposes. The meaning of a word must be ascertained in the context of achieving particular objectives. See Chevron, U.S.A., Inc. v. NRDC, Inc., 467 U.S. 837, 861 (1984). VA first reviewed the Act to determine whether another section could provide additional context. The term “net tangible benefit test” is not used elsewhere in the Act. Neither is the term “test”. The nearest analog VA could find in the Act was in section 401, referring to “supervisory stress tests.” Under section 401, the Board of Governors of the Federal Reserve System is required to conduct supervisory stress tests of certain bank holding companies “to evaluate whether such bank holding companies have the capital, on a total consolidated basis, necessary to absorb losses as a result of adverse economic conditions.”
VA does not believe the section 401 supervisory stress test is a valid comparison to section 309’s net tangible benefit test. A supervisory stress test based on estimates and forecasts of economies seems a completely different character from a test to show whether a lender is preying upon an individual borrower. The objectives are entirely different. “Context Counts.” Envtl. Def. v. Duke Energy Corp. 549 U.S. 561 (2007) (explaining that “There is, then, no `effectively irrebuttable’ presumption that the same defined term in different provisions of the same statute must be `interpreted identically.’”
In paragraph (2) of subsection (b), Congress required that a fixed rate refinance loan must meet certain Start Printed Page 64462 interest rate requirements, or the Secretary is not authorized to guarantee the loan. In paragraphs (3) and (4), Congress required that an adjustable rate refinance loan must meet certain interest rate and discount point requirements, or the Secretary is not authorized to guarantee the loan. If each of these other provisions in subsection (b) sets forth a pass/fail standard that must be met, not just disclosed, VA finds it difficult to conclude that merely disclosing the fact that a loan is harmful would be sufficient to satisfy the net tangible benefit test of paragraph (1). It would be inconsistent to do so.
Guaranteeing a loan when VA and others know it would cause a veteran financial harm would be inconsistent with the statutory context of section 309
The consistency in the legislative scheme is not limited to the requirements of subsection (b). The same pass/fail sort of standard applies to the recoupment requirements of subsection (a). The same pass/fail sort of standard also applies to the seasoning requirements of subsection (c).
Again, VA interprets the law within the coherent and consistent framework that Congress prescribed. At each step, in every provision in section 309, Congress identified an issue, imposed a requirement, and prohibited a VA guaranty as the consequence of noncompliance with one of the section’s requirements. It would be inconsistent with this coherent statutory scheme if the consequence of noncompliance with the net tangible benefit test of subsection (b)(1) would be wholly different. To infer the term “net tangible benefit disclosure” within this context when Congress selected the term “net tangible benefit test,” would not only fail to give the proper weight to the word selection, but would also require an inference, without evidence, that Congress had departed from the coherent framework it had designed. VA believes it would run counter to the purpose of a statute entitled the “Protecting Veterans from Predatory Lending Act” for VA to guarantee or insure a loan when all parties involved-lender, veteran, VA, secondary market investors, and Congress-know a loan fails a net tangible benefit test, meaning that the loan is predatory and indeed will cause financial harm. See INS v. National Ctr. for Immigrants’ Rights, 502 U.S. 183, 189-90 (1991) (acknowledging that title of statute can aid in resolving ambiguity in text).