The money goes first to what is overdue
What the document says“A holder of a loan guaranteed under such chapter for which the Secretary makes a partial claim under this section shall apply the amount paid by the Secretary for the partial claim first to arrearages, if any, on the guaranteed loan. Such arrearages may include any additional costs (such as taxes, insurance premiums, or homeowner's dues) the Secretary determines necessary to prevent or resolve a default.”
The holder must put the money toward the overdue amounts on the loan before anything else. The Secretary of Veterans Affairs may treat taxes, insurance premiums and homeowner's dues as part of those overdue amounts.
What the document actually says“A holder of a loan guaranteed under such chapter for which the Secretary makes a partial claim under this section shall apply the amount paid by the Secretary for the partial claim first to arrearages, if any, on the guaranteed loan. Such arrearages may include any additional costs (such as taxes, insurance premiums, or homeowner's dues) the Secretary determines necessary to prevent or resolve a default.”
The lender must put the money on what is late first. Late amounts can take in taxes and other bills.
The other bills are ones the VA says must be paid to keep the loan on track. Home insurance is one. Dues to a homeowner group are another.
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