Section 108 Community Development Loan Guarantee Program: Participation of States as Borrowers Pursuant to Section 222 of the Omnibus Appropriations Act, 2009, 36384-36390 [E9-17326]
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Federal Register / Vol. 74, No. 139 / Wednesday, July 22, 2009 / Rules and Regulations
DEPARTMENT OF HOUSING AND
URBAN DEVELOPMENT
24 CFR Part 570
[Docket No. 5326–I–01]
Section 108 Community Development
Loan Guarantee Program: Participation
of States as Borrowers Pursuant to
Section 222 of the Omnibus
Appropriations Act, 2009
AGENCY: Office of the Assistant
Secretary for Community Planning and
Development, HUD.
ACTION: Interim rule.
This interim rule implements
section 222 in Division I of the Omnibus
Appropriations Act, 2009, Public Law
111–8 (2009 Appropriations Act).
Section 222 authorizes HUD, to the
extent of Fiscal Year (FY) 2009 loan
guarantee authority, to provide
community development loan
guarantees, under section 108 of the
Housing and Community Development
Act of 1974 (HCD Act), to states
borrowing on behalf of local
governments in nonentitlement areas
(governments that do not receive annual
Community Development Block Grants
(CDBG) from HUD). Section 108
authorizes HUD to guarantee notes
issued by such nonentitlement local
governments or their designated public
agencies supported by the respective
state’s pledge of its CDBG funds. Prior
to the enactment of section 222, HUD
lacked authority to guarantee notes
issued by states on their behalf. State
officials interested in applying for a loan
guarantee commitment pursuant to this
new authority should take note that
HUD’s authority to issue such
commitments will expire on September
30, 2010 (and could be fully utilized by
other borrowers before that date), unless
the provision continues to be included
in future appropriations acts. The
interim rule, however, contains
language that will make the provisions
implementing this new authority
continue to apply, in the event that
provisions equivalent to section 222 are
included in future appropriations acts.
Because the provisions of section 222
expand, rather than replace, existing
Section 108 authority, HUD will also
continue to accept nonentitlement local
government issuers’ state-supported
applications for loan guarantee
commitments.
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SUMMARY:
Effective Date: August 21, 2009.
Comment Due Date: September 21,
2009.
DATES:
Interested persons are
invited to submit comments to be
ADDRESSES:
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considered in formulating the final rule
to the Regulations Division, Office of
General Counsel, Department of
Housing and Urban Development 451
7th Street, SW., Room 10276,
Washington, DC 20410–0500.
Communications must refer to the above
docket number and title. There are two
methods for submitting public
comments. All submissions must refer
to the above docket number and title.
1. Submission of Comments by Mail.
Comments may be submitted by mail to
the Regulations Division, Office of
General Counsel, Department of
Housing and Urban Development, 451
7th Street, SW., Room 10276,
Washington, DC 20410–0001.
2. Electronic Submission of
Comments. Interested persons may
submit comments electronically through
the Federal eRulemaking Portal at
https://www.regulations.gov. HUD
strongly encourages commenters to
submit comments electronically.
Electronic submission of comments
allows the commenter maximum time to
prepare and submit a comment, ensures
timely receipt by HUD, and enables
HUD to make them immediately
available to the public. Comments
submitted electronically through the
https://www.regulations.gov Web site can
be viewed by other commenters and
interested members of the public.
Commenters should follow the
instructions provided on that site to
submit comments electronically.
Note: To receive consideration as public
comments, comments must be submitted
through one of the two methods specified
above. Again, all submissions must refer to
the docket number and title of the rule. No
Facsimile Comments. Facsimile (FAX)
comments are not acceptable.
Public Inspection of Public
Comments. All properly submitted
comments and communications
submitted to HUD will be available for
public inspection and copying between
8 a.m. and 5 p.m. weekdays at the above
address. Due to security measures at the
HUD Headquarters building, an advance
appointment to review the public
comments must be scheduled by calling
the Regulations Division at (202) 708–
3055 (this is not a toll-free number).
Individuals with speech or hearing
impairments may access this number
via TTY by calling the Federal
Information Relay Service at (800) 877–
8339. Copies of all comments submitted
are available for inspection and
downloading at https://
www.regulations.gov.
FOR FURTHER INFORMATION CONTACT: Paul
Webster, Director, Financial
Management Division, Office of
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Community Planning and Development,
Department of Housing and Urban
Development, 451 7th Street, SW.,
Room 7186, Washington, DC 20410;
telephone number 202–708–1871 (this
is not a toll-free number). Individuals
with speech or hearing impairments
may access this number through TTY by
calling the toll-free Federal Information
Relay Service at 800–877–8339. FAX
inquiries (but not comments on this
interim rule) may be sent to Mr. Webster
at 202–708–1798 (this is not a toll-free
number).
SUPPLEMENTARY INFORMATION:
I. Background
The Section 108 Community
Development Loan Guarantee program
provides local governments with access
to long-term (up to 20-year) fixed-rate
loans at relatively low interest rates to
finance certain categories of eligible
CDBG projects. Under section 108(a) of
the HCD Act (section 108(a)), HUD
enters into commitments to guarantee,
and subsequently guarantees,
promissory notes issued by units of
general local government (or their
designated public agencies). Under
section 108(r) of the HCD Act, HUD,
acting on behalf of these borrowers,
arranges for the issuance of a series of
trust certificates based on a large pool of
such notes and engages underwriters
(investment banking firms) to market
and sell interests in the trust certificates
to investors in a periodic, generally
annual, public offering.
HUD guarantees the timely payment
of the principal of and interest on the
trust certificates and, under the
provisions of section 108, the full faith
and credit of the United States is
pledged to honor the guarantee. Because
of the federal guarantee, interest payable
on the trust certificates and the
underlying notes can be set at relatively
low fixed rates; investors are willing to
purchase interests in the certificates at
such interest rates because of the
security provided by the guarantee.
Proceeds of the sale, minus certain
underwriting and trust administration
fees and costs, are advanced to the local
government borrowers, who pay interest
on a given year’s principal installment
at the fixed interest rate borne by the
trust certificate of corresponding
maturity.
To accommodate local government
borrowers that need financing for
projects in the months between the
periodic public offering of fixed-rate
trust certificates, HUD also guarantees
promissory notes under section 108(a)
that initially bear interest at rates that
adjust monthly in relation to a reference
short-term interest rate. Such local
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governments then typically opt to have
their notes pooled with other issuers’
notes in the next public offering of
fixed-rate trust certificates, at which
time, under the terms of the notes, the
interest rates on principal installments
of particular maturities convert to the
fixed rates borne by the trust certificates
of corresponding maturities.
Contemporaneous with HUD’s
guarantee, local government borrowers
enter into contracts with HUD in which
they agree to use funds for eligible
activities, to make the payments
required under their notes, and to
reimburse HUD for any payments made
on their behalf. These obligations are
secured by pledges of annual CDBG
allocations—the local government’s own
allocation in the case of CDBG
entitlement communities and, in the
case of local governments in
nonentitlement areas, the state’s
allocation. HUD is also authorized to
require (and as a matter of policy does
require) other security, such as interests
in real property and pledges of local
revenues, in addition to pledged CDBG
funds. While HUD’s guarantees to
investors are backed by the full faith
and credit of the United States, the local
government borrower’s obligations to
HUD are payable only from pledged
CDBG funds and any additional security
furnished, and are not general
obligations of the borrower secured by
its full faith and credit (except to the
extent that the borrower chooses to
furnish such a pledge as additional
security).
Historically, section 108(a) guarantee
authority has been limited to the
guarantee of notes or other obligations
issued by eligible public entities,
defined in section 108(o) of the HCD Act
as ‘‘any unit of general local
government, including units of general
local government in nonentitlement
areas,’’ or by public agencies designated
by such eligible public entities. States
have participated in the program by
supporting nonentitlement local
governments’ applications to HUD for
loan guarantee assistance and by
pledging the State’s CDBG allocations to
secure the local government issuers’
obligations. However, states have not
been able to participate in the program
as issuers (borrowers). This stands in
contrast with the states’ CDBG program
under section 106 of the HCD Act
(subpart I of part 570), under which
HUD makes annual formula grants to
the states, which in turn distribute
funds to local governments in
nonentitlement areas to carry out
eligible activities.
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II. The 2009 Appropriations Act and
Section 222
Pursuant to section 108 of the HCD
Act and the Federal Credit Reform Act
of 1990, as amended, in order to
authorize HUD to make commitments to
guarantee, and guarantee pursuant to
those commitments, subject to the loan
limitation for section 108 during a given
period of time, Congress appropriates
funds, which are referred to as ‘‘credit
subsidy,’’ to HUD for section 108 loan
guarantees in an amount sufficient to
cover the estimated long-term cost to the
federal government, excluding
administrative costs.
The 2009 Appropriations Act
appropriates credit subsidy funds of $6
million to HUD for the section 108 loan
guarantee program. These funds are
available for obligation for loan
guarantee commitments until September
30, 2010, subject to a loan limitation of
$275 million (or such lower amount as
may be required by the section 108
credit subsidy rate). If the entire FY
2009 section 108 credit subsidy
appropriation is obligated in FY 2009,
the principal amount of commitments
issued cannot exceed $265,487,000.
One of the administrative provisions
of the 2009 Appropriations Act, section
222(a), provides that these credit
subsidy funds ‘‘may be used to
guarantee, or make commitments to
guarantee, notes, or other obligations
issued by any state on behalf of non
entitlement communities in the state in
accordance with the requirements of
section 108 of the Housing and
Community Development Act of 1974:
Provided, That, any State receiving such
a guarantee or commitment shall
distribute all funds subject to such
guarantee to the units of general local
government in nonentitlement areas that
received the commitment.’’
III. This Interim Rule
HUD interprets section 222, in
conjunction with section 108(a), as
authorizing HUD to make a commitment
to guarantee, and to subsequently
guarantee, a note or other obligation
issued by a state to the same extent
(subject to the special provisions of
section 222, discussed below) as a note
or other obligation issued by an eligible
public entity, if the commitment and
guarantee are made pursuant to the loan
guarantee authority provided in the
2009 Appropriations Act.
Certain provisions in section 108 of
the HCD Act refer to guarantees made,
or obligations guaranteed or eligible for
guarantee, ‘‘under’’ or ‘‘pursuant to’’
section 108. HUD also interprets these
statutory provisions, when read in
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conjunction with section 222, as
extending to guarantees that are made,
and obligations that are guaranteed or
eligible for guarantee, pursuant to the
additional authority provided in section
222. These include, but are not limited
to, the following key statutory
provisions:
1. Section 108(f), which provides that
the full faith and credit of the United
States is pledged to the payment of ‘‘all
guarantees made under this section’’
and provides, ‘‘Any such guarantee
made by the Secretary shall be
conclusive evidence of the eligibility of
the obligations for such guarantee with
respect to principal and interest, and the
validity of any such guarantee so made
shall be incontestable in the hands of a
holder of the guaranteed obligations.’’
2. Section 108(r), which (as more
particularly described in this preamble)
authorizes HUD to guarantee the
principal of and interest on trust
certificates based on and backed by a
trust or pool composed of ‘‘notes or
other obligations guaranteed or eligible
for guarantee * * * under this section.’’
This interim rule makes certain
necessary revisions to HUD’s section
108 regulations in 24 CFR part 570,
subpart M, to: (1) Reflect HUD’s
interpretations of section 222 and
section 108; (2) to implement several
other statutory provisions that by their
terms apply to guarantees ‘‘under’’ or
‘‘pursuant to’’ section 108; and (3)
extend, generally, to the guarantees
authorized by section 222 all of the
statutory requirements of section 108, as
required by section 222. One of the
principal revisions to the regulations in
24 CFR part 570, subpart M, is to the
definition of ‘‘debt obligation.’’
Existing § 570.702 defines the term
‘‘debt obligation’’ to mean: (1) A
promissory note or other obligation
issued by an eligible public entity (local
government) or its designated public
agency and guaranteed by HUD under
subpart M, or (2) a trust certificate or
other obligation offered by HUD or by a
trust or other offeror approved for
purposes of subpart M by HUD, which
is guaranteed by HUD under subpart M
and is based on and backed by a trust
or pool composed of notes or other
obligations issued by public entities or
their designated public agencies and
guaranteed or eligible for guarantee by
HUD under subpart M. Existing subpart
M does not restate the note guarantee
authority and trust certificate guarantee
authority provided in section 108(a) and
section 108(r); therefore, there is no
specific provision of the current
regulation that limits the scope of
HUD’s statutory guarantee authority to
‘‘debt obligations’’ as so defined.
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However, there are other statutory
provisions that are restated in the
regulations, using the defined term
‘‘debt obligation.’’ So that these
provisions do not exclude the
guarantees authorized by section 222,
the interim rule amends the definition
of the term ‘‘debt obligation.’’
Specifically, the interim rule amends
the definition of ‘‘debt obligation’’ to
make clear that, in addition to the
obligations that the term currently
covers, debt obligation also
encompasses a promissory note or other
obligation issued by a state and
guaranteed by HUD under subpart M.
Additionally, ‘‘debt obligation’’
encompasses a trust certificate or other
obligation offered by HUD or by a trust
or other offeror approved for purposes
of subpart M by HUD, and which is
guaranteed by HUD under subpart M
and based on and backed by a trust or
pool composed of notes or other
obligations issued by states and
guaranteed or eligible for guarantee by
HUD under subpart M (either alone, or
in combination with notes or other
obligations issued by eligible public
entities or their designated public
agencies and guaranteed or eligible for
guarantee by HUD under subpart M).
In addition to this revision of the
definition of ‘‘debt obligation,’’ the
interim rule adds a reference to ‘‘state’’
to several provisions of subpart M in
which reference is currently made only
to ‘‘public entity’’ (local government),
where this is necessary to ensure that
statutorily based provisions of the
regulations cover the guarantees
authorized by section 222. (See
revisions to §§ 570.704, 570.705,
570.709, and 570.711.)
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IV. Specific Provisions of This Interim
Rule
This section highlights some of the
more noteworthy provisions of the
interim rule. As described in section V
of this preamble, HUD has determined
that good cause exists to publish this
rule for effect without prior solicitation
of public comment. The Department,
however, recognizes the value and
importance of public input in the
rulemaking process and is providing a
60-day public comment period. HUD
welcomes comment on all aspects of the
interim rule, but specifically solicits
views on whether the regulatory
changes will likely increase the
participation by states in the section 108
program, given their new authority to
participate in the program as issuers of
obligations. All comments received on
the interim rule will be considered in
the development of the final rule.
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Eligible Issuers
HUD interprets ‘‘state’’ in Section 222
to mean any state, as defined in the HCD
Act that has elected to administer the
CDBG program for its nonentitlement
areas. The definition includes all of the
states, or any instrumentality of a state
approved by its Governor, except for the
state of Hawaii. The state of Hawaii is
excluded from the definition because it
has elected not to receive an annual
grant from HUD to administer a CDBG
program for its nonentitlement areas,
and, therefore, is unable to make the
pledge of CDBG funds required under
section 108. (The units of general local
government in Hawaii’s nonentitlement
areas, which currently are Hawaii,
Kauai, and Maui counties, receive
annual CDBG grants directly from HUD
and are eligible to apply for section 108
loan guarantee assistance on their own
behalf.) The definition also includes the
Commonwealth of Puerto Rico. (See
existing § 570.3 and the language in new
§ 570.711(a) limiting eligible applicants
to states that administer the CDBG
program.)
Distribution to Local Governments
Section 222 provides authority to
guarantee and make commitments to
guarantee notes or other obligations
issued by a state ‘‘on behalf of nonentitlement communities in the State,’’
and it requires that ‘‘any State receiving
such a guarantee or commitment shall
distribute all funds subject to such
guarantee to the units of general local
government in nonentitlement areas that
received the commitment.’’ HUD is
implementing these provisions of
section 222 by means of two interrelated
requirements that are added to the
section 108 regulations in a new
§ 570.711.
First, a state applying for a loan
guarantee commitment will be required
to identify, in its application, the local
governments that will be eligible to be
assisted by the state with proceeds of
loans guaranteed pursuant to the
commitment. Should HUD approve the
application and issue a commitment to
the state, the local governments so
identified will be deemed to be the local
governments that ‘‘received the
commitment’’ (and obligations
guaranteed pursuant to the commitment
will be deemed to be issued ‘‘on behalf
of’’ those local governments) for
purposes of section 222. States may
elect to identify these local governments
in either one of two ways: by naming
one or more specific nonentitlement
local governments eligible to be assisted
(which may be desired when a state is
applying for a loan guarantee to fund a
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particular, known local project or
projects) or by indicating that all or a
specified subset of the nonentitlement
public entities in the state are eligible to
be assisted and describing how
applications will be selected for
assistance. (See § 570.711(a)(1).)
Second, the state will be permitted to
use guaranteed loan funds only to make
grants and loans to the local
governments identified in its
application for activities eligible under
§ 570.703 of the existing section 108
regulations. Proceeds may be used
directly by the state for payment of
interest on the guaranteed obligation as
described in § 570.703(c); for payment
of issuance, underwriting, servicing,
trust administration, and other costs as
described in § 570.703(g); and for debt
service reserves as described in
§ 570.703(k), because these uses are for
the purpose of financing the local
governments’ activities. (See
§ 570.711(b).) These limitations on
permissible uses of funds will be
incorporated as a condition of the state’s
loan guarantee commitment pursuant to
§ 570.704(c)(4) of the existing
regulations, and as a term of the loan
guarantee assistance contract entered
into pursuant to § 570.705(b).
Application Process
As noted above, the interim rule
requires a state to identify the local
governments eligible to be assisted
through its loan guarantee application,
either by naming particular eligible
local governments or by indicating that
all or a specified subset of the state’s
nonentitlement local governments are
eligible and describing the state’s
application selection process. The
interim rule requires states to make this
required identification of eligible local
governments by the exclusive means of
including this information as a part of
the CDBG method of distribution
described in the action plan submitted
by the state pursuant to 24 CFR part 91.
In its action plan, the state will also be
required to note the approximate
amount of outstanding section 108
guaranteed obligations issued by the
state and by its nonentitlement local
governments, to identify the maximum
amount of guaranteed loan funds for
which the state will apply during the
period covered by the action plan, and
to describe the required pledge of the
state’s CDBG funds. If the state’s CDBG
action plan, as most recently submitted
or amended when the state initially
applies for a commitment, does not
include this information, the state will
be required to amend its action plan in
accordance with 24 CFR part 91 to
include such information prior to
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applying for the commitment. (See
§ 570.711(a)(1).)
Other required elements of the State’s
application submission will not be
required to be included in the state’s
CDBG action plan; namely, a proposed
schedule for repayment of the loan that
identifies the sources of repayment and
a description of the activities to be
funded and how such activities are
eligible and meet national objective
criteria. The rule gives states the option
of either including a detailed
description of activities for HUD review
and approval at the time of its
application for a commitment (which
may be desired when a state is applying
for a loan guarantee to fund a particular,
known local project or projects), or
instead submitting a description of the
type or types of local government
projects for which awards of grants or
loans will be made, indicating how
these types of projects will be eligible
and how they are intended to meet
national objective criteria. In the latter
case, the state will be required to obtain
HUD review and approval of a detailed
activity-description before disbursing
guaranteed loan funds to a local
government for the proposed activity.
This will accommodate states that may
wish to apply for and receive a loan
guarantee commitment (and, if desired
and if permitted by HUD, receive a
guarantee and escrow guaranteed loan
funds) prior to selecting particular local
governments’ projects for assistance,
while enabling the Department to carry
out its responsibility to ensure that
activities funded under section 108 are
eligible and meet national objective
criteria. (See § 570.711(a)(2)–(3).)
Consistent with part 58
environmental review procedures
applicable to State-assisted units of
general local government under the
current regulations, units of general
local government will be required to
submit requests for release of funds and
related certifications to the appropriate
HUD Field Office (rather than to the
state), as described in § 570.704(d) of the
existing regulations. (See § 570.711(e).)
HUD recognizes that some states may
wish to require that units of general
local government submit such requests
and certifications to the state for initial
review prior to submission to the
appropriate HUD Field Office. The
regulations in 24 CFR part 58 and 24
CFR part 570 do not prohibit states from
imposing such a requirement.
Apart from these provisions regarding
HUD review of activity eligibility and
national objective and environmental
review procedures, local governments to
be assisted by a state will be subject to
the requirements of the state CDBG
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program (see 24 CFR subpart I),
including the citizen participation
requirements in § 570.486(a) for local
governments’ applications to the state
for assistance, and the requirements in
§ 570.606 related to displacement,
relocation, acquisition, and replacement
of low- and moderate-income housing.
(See §§ 570.707(b), 570.710, and
570.711(d) and (e).)
Certification With Respect to Other
Financing Efforts and Need for
Guarantee
Section 108(a) provides, in relevant
part, that ‘‘A guarantee under this
section [Section 108] may be used to
assist a grantee in obtaining financing
only if the grantee has made efforts to
obtain such financing without the use of
such guarantee and cannot complete
such financing consistent with the
timely execution of the program plans
without such guarantee.’’ Consistent
with this provision, HUD currently
assures that this requirement is satisfied
by requiring each local government to
submit an appropriate certification
when it applies for a commitment of
loan guarantee assistance, as provided
in § 570.704(b)(4) of the existing
regulations. Because the intent of this
provision of section 108 is to assure that
assistance is genuinely needed in order
to be able to carry out the eligible
activity, and because the local
government that is planning the eligible
activity is in the best position to seek
other financing for the activity and
assess whether such financing can
timely be obtained, for section 222
guarantees HUD is interpreting
‘‘grantee’’ in this provision to mean the
assisted local government, not the state
issuer. This interpretation is consistent
with current practice: nonentitlement
local governments will only be required
to make the same certification that they
are currently required to make when
they apply to HUD for loan guarantee
assistance. This interim rule does not
introduce an additional certification by
the state. Because states will have the
option of issuing guaranteed obligations
and escrowing proceeds before local
governments and projects are selected
for assistance, the interim rule gives
states the option of obtaining the
required certification from each assisted
local government after HUD’s guarantee,
but before approving the local
government’s application for assistance.
(See § 570.711(c).)
70/30 Allocation Provisions
Section 108(a) also provides, in
relevant part, ‘‘Of the amount approved
in any appropriation Act for guarantees
under this section [Section 108] in any
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fiscal year, the Secretary shall allocate
70 percent for guarantees for
metropolitan cities, [and] urban
counties * * * and 30 percent for
guarantees for units of general local
government in nonentitlement areas.
The Secretary may waive the percentage
requirements of the preceding sentence
in any fiscal year only to the extent that
there is an absence of qualified
applicants or proposed activities from
metropolitan cities, [and] urban
counties * * * or units of general local
government in nonentitlement areas.’’ It
is HUD’s view that states’ applications
for guarantees and guarantees made
pursuant to section 222, because they
finance activities carried out by the
States’ nonentitlement communities,
constitute applications ‘‘from,’’ and
guarantees ‘‘for,’’ ‘‘units of general local
government in nonentitlement areas’’
within the meaning of these provisions.
Accordingly, states applying for loan
guarantees on behalf of their
nonentitlement communities will share
the 30 percent allocation (to the extent
it is not waived in a given year) with
nonentitlement communities applying
directly to HUD for loan guarantee
assistance. (See revisions to § 570.709.)
Continuation of Authority in Future
Legislation
The interim rule contains language
that would continue the applicability of
the requirements and procedures
described above in the event that
provisions equivalent to section 222 are
included in future appropriations acts.
(See the introductory sentence of
§ 570.711.)
V. Justification for Interim Rulemaking
HUD generally publishes regulatory
changes for public comment before
issuing them for effect, in accordance
with its own regulations on rulemaking
in 24 CFR part 10. Part 10, however,
does provide in § 10.1 for exceptions
from that general rule where the
Department finds good cause to omit
advance notice and public participation.
The good cause requirement is satisfied
when the prior public procedure is
‘‘impracticable, unnecessary, or contrary
to the public interest.’’ The Department
finds that a delay in the effectiveness of
this interim rule, in order to solicit prior
public comment, would be contrary to
the public interest and statutory
direction.
Section 222 of the 2009
Appropriations Act directed HUD to
promulgate regulations implementing
the administration of funds, as specified
in section 222 within 60 days of
enactment of that 2009 Appropriations
Act (May 11, 2009). Accordingly, it was
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the intent and direction of Congress that
the section 108 guarantees or
commitments authorized by the 2009
Appropriations Act be promptly made
available to states. Although HUD was
unable to meet the statutory deadline, it
has strived to issue the regulations as
close as possible to May 11, 2009. To
delay the effectiveness of this rule
would delay the benefits that Congress
sought be immediately available to
states, and consequently to the public
they serve.
The interim rule does not make
significant changes to the section 108
program regulations. The interim rule
primarily makes technical changes to
the regulations to implement the
authority, provided to HUD by section
222 of the 2009 Appropriations Act, to
guarantee obligations issued by states on
behalf of their nonentitlement
communities. To the greatest extent
possible, the interim rule maintains the
long-standing requirements for section
108 loan guarantees, which are familiar
to states and localities.
Given the limited scope, and
technical nature, of the interim
regulatory amendments, a delay for the
prior solicitation of comments might
unnecessarily delay the benefits of the
new financing mechanism authorized
by the 2009 Appropriations Act. HUD
also notes that its authority to make loan
guarantee commitments to states will
expire on September 30, 2010, and it is
therefore important to implement this
new financing expeditiously, as directed
by Congress in an effort to assure that
FY 2009 section 108 loan guarantee
authority will be fully committed before
HUD’s authority expires on September
30, 2010.
Although HUD has determined that
good cause exists to publish this rule for
effect without prior solicitation of
public comment, the Department
recognizes the value and importance of
public input in the rulemaking process.
Accordingly, HUD is issuing these
regulatory amendments on an interim
basis and providing for a 60-day public
comment period. All comments will be
considered in the development of the
final rule.
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VI. Findings and Certifications
Paperwork Reduction Act
The information collection
requirements contained in this interim
rule have been approved by the Office
of Management and Budget (OMB)
under the Paperwork Reduction Act of
1995 (44 U.S.C. 3501–3520) and
assigned control numbers 2506–0161,
2506–0117, and 2506–0085. In
accordance with the Paperwork
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Reduction Act, an agency may not
conduct or sponsor, and a person is not
required to respond to, a collection of
information, unless the collection
displays a currently valid OMB control
number.
Environmental Review
A Finding of No Significant Impact
(FONSI) with respect to the
environment has been made in
accordance with HUD regulations at 24
CFR part 50, which implement section
102(2)(C) of the National Environmental
Policy Act of 1969 (42 U.S.C.
4332(2)(C)). The Finding of No
Significant Impact is available for public
inspection between the hours of 8 a.m.
and 5 p.m. weekdays in the Regulations
Division, Office of General Counsel,
Department of Housing and Urban
Development, 451 7th Street, SW.,
Room 10276, Washington, DC 20410.
Due to security measures at the HUD
Headquarters building, please schedule
an appointment to review the FONSI by
calling the Regulations Division at 202–
708–3055 (this is not a toll-free
number). Individuals with speech or
hearing impairments may access this
number via TTY by calling the Federal
Information Relay Service at 800–877–
8339.
Federalism
Executive Order 13132 (entitled
‘‘Federalism’’) prohibits an agency from
publishing any rule that has federalism
implications if the rule either imposes
substantial direct compliance costs on
state and local governments and is not
required by statute, or the rule preempts
state law, unless the agency meets the
consultation and funding requirements
of section 6 of the Executive Order. This
proposed rule does not have federalism
implications and does not impose
substantial direct compliance costs on
state and local governments nor
preempt state law within the meaning of
the Executive Order.
Unfunded Mandates Reform Act
Title II of the Unfunded Mandates
Reform Act of 1995 (2 U.S.C. 1531–
1538) (UMRA) establishes requirements
for federal agencies to assess the effects
of their regulatory actions on state,
local, and tribal governments, and on
the private sector. This proposed rule
does not impose any federal mandates
on any state, local, or tribal
governments, or on the private sector,
within the meaning of UMRA.
Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA)
(5 U.S.C. 601 et seq.) generally requires
an agency to conduct a regulatory
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flexibility analysis of any rule subject to
notice and comment rulemaking
requirements, unless the agency certifies
that the rule will not have a significant
economic impact on a substantial
number of small entities. This rule
would implement new statutory
authority to provide an additional,
alternative route for states and their
nonentitlement local governments to
obtain financing for eligible community
development projects. Specifically, the
interim rule authorizes HUD to provide
community development loan
guarantees to states borrowing on behalf
of local governments in nonentitlement
areas. Therefore, the primary focus of
the interim regulatory amendments is
on the states, which are relatively large
jurisdictions. Further, and as detailed in
the preamble above, the interim rule, to
the greatest extent possible, tracks the
language of the authorizing statute.
Accordingly, the interim regulatory text
reflects statutorily mandated
requirements that HUD does not have
the discretion to modify. Where HUD
has been granted the discretion to
elaborate on the statutory requirements,
it has built upon the existing
requirements for section 108 loan
guarantees, which are familiar to States
and localities. Moreover, these
amendments are technical, and
procedural, relating to the distribution
of funds to local governments and the
procedures to be followed by states in
applying for the loan guarantees
authorized by the provision. Therefore,
it is HUD’s determination that these
revisions impose no significant
economic impact on a substantial
number of small entities. The
undersigned certifies that this rule will
not have a significant impact on a
substantial number of small entities.
Notwithstanding HUD’s
determination that this rule will not
have a significant effect on a substantial
number of small entities, HUD
specifically invites comments regarding
any less burdensome alternatives to this
rule that will meet HUD’s objectives as
described in this preamble.
Catalog of Federal Domestic Assistance
The Catalog of Federal Domestic
Assistance (CFDA) program number for
the state CDBG program is 14.228, and
the CDFA program number for the
section 108 loan guarantee program is
14.248.
List of Subjects in 24 CFR Part 570
Administrative practice and
procedure, American Samoa,
Community Development Block Grants,
Grant programs—education, Grant
programs—housing and community
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development, Guam, Indians, Loan
programs—housing and community
development, Low and moderate
income housing, Northern Mariana
Islands, Pacific Islands Trust Territory,
Puerto Rico, Reporting and
recordkeeping requirements, Student
aid, Virgin Islands.
and § 570.705(b)(2) or pursuant to
§ 570.711.
■ 4. In § 570.704, revise paragraph
(c)(3)(i)(D), the first sentence of
paragraph (c)(4), and the first sentence
of paragraph (c)(5) to read as follows:
Accordingly, for the reasons described
in the preamble, 24 CFR part 570 is
amended as follows:
*
■
PART 570—COMMUNITY
DEVELOPMENT BLOCK GRANTS
1. The authority citation for 24 part
570 continues to read as follows:
■
Authority: 42 U.S.C. 5300–5320.
2. In § 570.481, revise paragraph (a)(2)
to read as follows:
■
§ 570.481
Definitions.
(a) * * *
(2) CDBG funds means Community
Development Block Grant funds, in the
form of grants under this subpart and
program income, and loans guaranteed
under section 108 of the Act.
■ 3. In § 570.701, revise the definitions
of ‘‘borrower’’, ‘‘debt obligation’’,
‘‘guaranteed loan funds’’, and ‘‘stateassisted public entity’’ to read as
follows:
jlentini on DSKJ8SOYB1PROD with RULES4
§ 570.701
Definitions.
Borrower means the public entity or
its designated public agency or the State
that issues debt obligations under this
subpart.
Debt obligation means a promissory
note or other obligation issued by a
public entity or its designated public
agency or by a State and guaranteed by
HUD under this subpart, or a trust
certificate or other obligation offered by
HUD or by a trust or other offeror
approved for purposes of this subpart by
HUD, which is guaranteed by HUD
under this subpart and is based on and
backed by a trust or pool composed of
notes or other obligations issued by
public entities or their designated
public agencies or by States and
guaranteed or eligible for guarantee by
HUD under this subpart.
*
*
*
*
*
Guaranteed loan funds means the
proceeds payable to the borrower from
the issuance of debt obligations under
this subpart and includes funds
received by a nonentitlement public
entity from a State under § 570.711.
*
*
*
*
*
State-assisted public entity means a
unit of general local government in a
nonentitlement area which is assisted
by a State as required in § 570.704(b)(9)
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§ 570.704
Application requirements.
*
*
*
*
(c) * * *
(3) * * *
(i) * * *
(D) The public entity’s or State’s
ability to furnish adequate security
pursuant to § 570.705(b), and
*
*
*
*
*
(4) HUD will notify the public entity
or State in writing that the loan
guarantee request has either been
approved, reduced, or disapproved. If
the request is reduced or disapproved,
the public entity or State shall be
informed of the specific reasons for
reduction or disapproval. * * *
(5) Amendments. If the public entity
or State wishes to carry out or assist in
an activity not previously described in
its application or to substantially change
the purpose, scope, location, or
beneficiaries of an activity, the
amendment must be approved by HUD.
***
*
*
*
*
*
■ 5. In § 570.705, revise paragraphs
(a)(2)(ii) and (g) to read as follows:
§ 570.705
Loan requirements.
(a) * * *
(2) * * *
(ii) States and State-assisted public
entities. No commitment to guarantee
shall be made if the total unpaid balance
of debt obligations guaranteed under
this subpart (excluding any amount
defeased under the contract entered into
under § 570.705(b)(1)) on behalf of the
State and all State-assisted public
entities in the State would thereby
exceed an amount equal to five times
the amount of the most recent grant
received by such State under subpart I.
*
*
*
*
*
(g) Issuance, underwriting, servicing,
and other costs. Each public entity or its
designated public agency and each State
issuing debt obligations under this
subpart must pay the issuance,
underwriting, servicing, trust
administration, and other costs
associated with the private sector
financing of the debt obligations. Such
costs are payable out of the guaranteed
loan funds and shall be secured under
paragraph (b) of this section.
*
*
*
*
*
■ 6. Revise § 570.709 to read as follows:
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36389
§ 570.709 Allocation of loan guarantee
assistance.
Of the amount approved in any
appropriation act for guarantees under
this subpart in any fiscal year, 70
percent shall be allocated for
entitlement public entities and 30
percent shall be allocated for States and
nonentitlement public entities. HUD
need not comply with these percentage
requirements in any fiscal year to the
extent that there is an absence of
applications approvable under this
subpart from entitlement public entities
or from States and nonentitlement
public entities.
■ 7. In § 570.710, revise the third
sentence to read as follows:
§ 570.710
State responsibilities.
* * * Upon approval by HUD of an
application from a State or a Stateassisted public entity, the State will be
principally responsible, subject to HUD
oversight under subpart I of this part, for
ensuring compliance with all applicable
requirements governing the use of the
guaranteed loan funds. * * *
■ 8. Add a new § 570.711 to read as
follows:
§ 570.711 State borrowers; additional
requirements and application procedures.
This section contains additional
requirements and alternative
application procedures for guarantees of
debt obligations under section 108 of
the Act pursuant to the additional
authority provided in paragraph (a) of
section 222 of the Transportation,
Housing and Urban Development, and
Related Agencies Appropriations Act,
2009, Public Law 111–8; 123 Stat. 524
at 976 (Division I of the Omnibus
Appropriations Act, 2009) (‘‘section
222’’ and the ‘‘2009 Appropriations
Act’’). If any other federal law or laws
are enacted after March 11, 2009, the
effect of which with respect to loan
guarantee authority provided in an
appropriations act is equivalent to the
effect of section 222 with respect to the
loan guarantee authority provided in the
2009 Appropriations Act, the additional
requirements and alternative
application procedures in this section
shall also apply to guarantees of debt
obligations under section 108 of the act,
pursuant to the additional authority
provided in such other federal law or
laws.
(a) Applications by States.
Notwithstanding § 570.702 and
§ 570.704, states that administer the
CDBG program (under subpart I of this
part) may apply for loan guarantee
assistance under this subpart, and such
application shall consist of the
following:
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jlentini on DSKJ8SOYB1PROD with RULES4
(1) A copy of the State’s CDBG
method of distribution in the action
plan most recently submitted or
amended pursuant to 24 CFR part 91. In
addition to the requirements of 24 CFR
part 91, such method of distribution
must note the approximate amount of
section 108 guaranteed obligations
issued by the State and all
nonentitlement public entities that are
outstanding at the time of such
submission or amendment, identify the
maximum amount of guaranteed loan
funds for which the State will apply
during the period covered by the action
plan, describe the pledge of grants
required under § 570.705(b)(2), and
identify the nonentitlement public
entities in the State that may be assisted
with such guaranteed loan funds (to
satisfy this requirement, the method of
distribution may identify one or more
specific nonentitlement public entities
that may be assisted, or may indicate
that all or a specified subset of the
nonentitlement public entities in the
State may be assisted and describe how
applications will be selected for
assistance).
(2) Either:
(i) A description of each activity to be
carried out with the guaranteed loan
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funds, including the specific provision
of § 570.703 under which the activity is
eligible and how the activity meets one
of the criteria in § 570.208; or
(ii) An indication of the type or types
of activities to be assisted, the
provisions of § 570.703 under which
such activities are eligible, and the
criteria in § 570.208 intended to be met,
in which case HUD shall require that
the description referred to in paragraph
(a)(2)(i) of this section be submitted to
and approved by HUD before the State
disburses guaranteed loan funds to a
public entity for the activity.
(3) A schedule for repayment of the
loan which identifies the sources of
repayment.
(b) Distribution to Local Governments.
Proceeds payable to a State from the
issuance of debt obligations under this
subpart may be used only for:
(1) Loans and grants to the
nonentitlement public entities
identified in the State’s approved
application for activities eligible under
§ 570.703; and
(2) The uses specified in paragraphs
(c), (g), and (k) of § 570.703.
(c) Certification of need. Prior to
approving a nonentitlement public
entity’s application for assistance, the
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State shall obtain a certification from
such public entity conforming to
§ 570.704(b)(4).
(d) Local government citizen
participation requirements. The
presubmission and citizen participation
requirements in § 570.704(a) and the
third sentence of § 570.704(c)(5) shall
not apply with respect to
nonentitlement public entities’
applications to a State for assistance
under this section. Nonentitlement
public entities shall comply with the
provisions of § 570.486(a) with respect
to such applications and such
assistance.
(e) Environmental review;
displacement, relocation, acquisition,
and replacement of housing.
Nonentitlement public entities assisted
by a State under this section shall
comply with § 570.704(d) and (e).
Dated: June 23, 2009.
´
Nelson R. Bregon,
General Deputy Assistant Secretary for
Community Planning and Development.
[FR Doc. E9–17326 Filed 7–21–09; 8:45 am]
BILLING CODE 4210–67–P
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Agencies
[Federal Register Volume 74, Number 139 (Wednesday, July 22, 2009)]
[Rules and Regulations]
[Pages 36384-36390]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-17326]
[[Page 36383]]
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Part IV
Department of Housing and Urban Development
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24 CFR Part 57
Section 108 Community Development Loan Guarantee Program: Participation
of States as Borrowers Pursuant to Section 222 of the Omnibus
Appropriations Act, 2009; Interim Rule
Federal Register / Vol. 74, No. 139 / Wednesday, July 22, 2009 /
Rules and Regulations
[[Page 36384]]
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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
24 CFR Part 570
[Docket No. 5326-I-01]
Section 108 Community Development Loan Guarantee Program:
Participation of States as Borrowers Pursuant to Section 222 of the
Omnibus Appropriations Act, 2009
AGENCY: Office of the Assistant Secretary for Community Planning and
Development, HUD.
ACTION: Interim rule.
-----------------------------------------------------------------------
SUMMARY: This interim rule implements section 222 in Division I of the
Omnibus Appropriations Act, 2009, Public Law 111-8 (2009 Appropriations
Act). Section 222 authorizes HUD, to the extent of Fiscal Year (FY)
2009 loan guarantee authority, to provide community development loan
guarantees, under section 108 of the Housing and Community Development
Act of 1974 (HCD Act), to states borrowing on behalf of local
governments in nonentitlement areas (governments that do not receive
annual Community Development Block Grants (CDBG) from HUD). Section 108
authorizes HUD to guarantee notes issued by such nonentitlement local
governments or their designated public agencies supported by the
respective state's pledge of its CDBG funds. Prior to the enactment of
section 222, HUD lacked authority to guarantee notes issued by states
on their behalf. State officials interested in applying for a loan
guarantee commitment pursuant to this new authority should take note
that HUD's authority to issue such commitments will expire on September
30, 2010 (and could be fully utilized by other borrowers before that
date), unless the provision continues to be included in future
appropriations acts. The interim rule, however, contains language that
will make the provisions implementing this new authority continue to
apply, in the event that provisions equivalent to section 222 are
included in future appropriations acts. Because the provisions of
section 222 expand, rather than replace, existing Section 108
authority, HUD will also continue to accept nonentitlement local
government issuers' state-supported applications for loan guarantee
commitments.
DATES: Effective Date: August 21, 2009.
Comment Due Date: September 21, 2009.
ADDRESSES: Interested persons are invited to submit comments to be
considered in formulating the final rule to the Regulations Division,
Office of General Counsel, Department of Housing and Urban Development
451 7th Street, SW., Room 10276, Washington, DC 20410-0500.
Communications must refer to the above docket number and title. There
are two methods for submitting public comments. All submissions must
refer to the above docket number and title.
1. Submission of Comments by Mail. Comments may be submitted by
mail to the Regulations Division, Office of General Counsel, Department
of Housing and Urban Development, 451 7th Street, SW., Room 10276,
Washington, DC 20410-0001.
2. Electronic Submission of Comments. Interested persons may submit
comments electronically through the Federal eRulemaking Portal at
https://www.regulations.gov. HUD strongly encourages commenters to
submit comments electronically. Electronic submission of comments
allows the commenter maximum time to prepare and submit a comment,
ensures timely receipt by HUD, and enables HUD to make them immediately
available to the public. Comments submitted electronically through the
https://www.regulations.gov Web site can be viewed by other commenters
and interested members of the public. Commenters should follow the
instructions provided on that site to submit comments electronically.
Note: To receive consideration as public comments, comments must
be submitted through one of the two methods specified above. Again,
all submissions must refer to the docket number and title of the
rule. No Facsimile Comments. Facsimile (FAX) comments are not
acceptable.
Public Inspection of Public Comments. All properly submitted
comments and communications submitted to HUD will be available for
public inspection and copying between 8 a.m. and 5 p.m. weekdays at the
above address. Due to security measures at the HUD Headquarters
building, an advance appointment to review the public comments must be
scheduled by calling the Regulations Division at (202) 708-3055 (this
is not a toll-free number). Individuals with speech or hearing
impairments may access this number via TTY by calling the Federal
Information Relay Service at (800) 877-8339. Copies of all comments
submitted are available for inspection and downloading at https://www.regulations.gov.
FOR FURTHER INFORMATION CONTACT: Paul Webster, Director, Financial
Management Division, Office of Community Planning and Development,
Department of Housing and Urban Development, 451 7th Street, SW., Room
7186, Washington, DC 20410; telephone number 202-708-1871 (this is not
a toll-free number). Individuals with speech or hearing impairments may
access this number through TTY by calling the toll-free Federal
Information Relay Service at 800-877-8339. FAX inquiries (but not
comments on this interim rule) may be sent to Mr. Webster at 202-708-
1798 (this is not a toll-free number).
SUPPLEMENTARY INFORMATION:
I. Background
The Section 108 Community Development Loan Guarantee program
provides local governments with access to long-term (up to 20-year)
fixed-rate loans at relatively low interest rates to finance certain
categories of eligible CDBG projects. Under section 108(a) of the HCD
Act (section 108(a)), HUD enters into commitments to guarantee, and
subsequently guarantees, promissory notes issued by units of general
local government (or their designated public agencies). Under section
108(r) of the HCD Act, HUD, acting on behalf of these borrowers,
arranges for the issuance of a series of trust certificates based on a
large pool of such notes and engages underwriters (investment banking
firms) to market and sell interests in the trust certificates to
investors in a periodic, generally annual, public offering.
HUD guarantees the timely payment of the principal of and interest
on the trust certificates and, under the provisions of section 108, the
full faith and credit of the United States is pledged to honor the
guarantee. Because of the federal guarantee, interest payable on the
trust certificates and the underlying notes can be set at relatively
low fixed rates; investors are willing to purchase interests in the
certificates at such interest rates because of the security provided by
the guarantee. Proceeds of the sale, minus certain underwriting and
trust administration fees and costs, are advanced to the local
government borrowers, who pay interest on a given year's principal
installment at the fixed interest rate borne by the trust certificate
of corresponding maturity.
To accommodate local government borrowers that need financing for
projects in the months between the periodic public offering of fixed-
rate trust certificates, HUD also guarantees promissory notes under
section 108(a) that initially bear interest at rates that adjust
monthly in relation to a reference short-term interest rate. Such local
[[Page 36385]]
governments then typically opt to have their notes pooled with other
issuers' notes in the next public offering of fixed-rate trust
certificates, at which time, under the terms of the notes, the interest
rates on principal installments of particular maturities convert to the
fixed rates borne by the trust certificates of corresponding
maturities.
Contemporaneous with HUD's guarantee, local government borrowers
enter into contracts with HUD in which they agree to use funds for
eligible activities, to make the payments required under their notes,
and to reimburse HUD for any payments made on their behalf. These
obligations are secured by pledges of annual CDBG allocations--the
local government's own allocation in the case of CDBG entitlement
communities and, in the case of local governments in nonentitlement
areas, the state's allocation. HUD is also authorized to require (and
as a matter of policy does require) other security, such as interests
in real property and pledges of local revenues, in addition to pledged
CDBG funds. While HUD's guarantees to investors are backed by the full
faith and credit of the United States, the local government borrower's
obligations to HUD are payable only from pledged CDBG funds and any
additional security furnished, and are not general obligations of the
borrower secured by its full faith and credit (except to the extent
that the borrower chooses to furnish such a pledge as additional
security).
Historically, section 108(a) guarantee authority has been limited
to the guarantee of notes or other obligations issued by eligible
public entities, defined in section 108(o) of the HCD Act as ``any unit
of general local government, including units of general local
government in nonentitlement areas,'' or by public agencies designated
by such eligible public entities. States have participated in the
program by supporting nonentitlement local governments' applications to
HUD for loan guarantee assistance and by pledging the State's CDBG
allocations to secure the local government issuers' obligations.
However, states have not been able to participate in the program as
issuers (borrowers). This stands in contrast with the states' CDBG
program under section 106 of the HCD Act (subpart I of part 570), under
which HUD makes annual formula grants to the states, which in turn
distribute funds to local governments in nonentitlement areas to carry
out eligible activities.
II. The 2009 Appropriations Act and Section 222
Pursuant to section 108 of the HCD Act and the Federal Credit
Reform Act of 1990, as amended, in order to authorize HUD to make
commitments to guarantee, and guarantee pursuant to those commitments,
subject to the loan limitation for section 108 during a given period of
time, Congress appropriates funds, which are referred to as ``credit
subsidy,'' to HUD for section 108 loan guarantees in an amount
sufficient to cover the estimated long-term cost to the federal
government, excluding administrative costs.
The 2009 Appropriations Act appropriates credit subsidy funds of $6
million to HUD for the section 108 loan guarantee program. These funds
are available for obligation for loan guarantee commitments until
September 30, 2010, subject to a loan limitation of $275 million (or
such lower amount as may be required by the section 108 credit subsidy
rate). If the entire FY 2009 section 108 credit subsidy appropriation
is obligated in FY 2009, the principal amount of commitments issued
cannot exceed $265,487,000.
One of the administrative provisions of the 2009 Appropriations
Act, section 222(a), provides that these credit subsidy funds ``may be
used to guarantee, or make commitments to guarantee, notes, or other
obligations issued by any state on behalf of non entitlement
communities in the state in accordance with the requirements of section
108 of the Housing and Community Development Act of 1974: Provided,
That, any State receiving such a guarantee or commitment shall
distribute all funds subject to such guarantee to the units of general
local government in nonentitlement areas that received the
commitment.''
III. This Interim Rule
HUD interprets section 222, in conjunction with section 108(a), as
authorizing HUD to make a commitment to guarantee, and to subsequently
guarantee, a note or other obligation issued by a state to the same
extent (subject to the special provisions of section 222, discussed
below) as a note or other obligation issued by an eligible public
entity, if the commitment and guarantee are made pursuant to the loan
guarantee authority provided in the 2009 Appropriations Act.
Certain provisions in section 108 of the HCD Act refer to
guarantees made, or obligations guaranteed or eligible for guarantee,
``under'' or ``pursuant to'' section 108. HUD also interprets these
statutory provisions, when read in conjunction with section 222, as
extending to guarantees that are made, and obligations that are
guaranteed or eligible for guarantee, pursuant to the additional
authority provided in section 222. These include, but are not limited
to, the following key statutory provisions:
1. Section 108(f), which provides that the full faith and credit of
the United States is pledged to the payment of ``all guarantees made
under this section'' and provides, ``Any such guarantee made by the
Secretary shall be conclusive evidence of the eligibility of the
obligations for such guarantee with respect to principal and interest,
and the validity of any such guarantee so made shall be incontestable
in the hands of a holder of the guaranteed obligations.''
2. Section 108(r), which (as more particularly described in this
preamble) authorizes HUD to guarantee the principal of and interest on
trust certificates based on and backed by a trust or pool composed of
``notes or other obligations guaranteed or eligible for guarantee * * *
under this section.''
This interim rule makes certain necessary revisions to HUD's
section 108 regulations in 24 CFR part 570, subpart M, to: (1) Reflect
HUD's interpretations of section 222 and section 108; (2) to implement
several other statutory provisions that by their terms apply to
guarantees ``under'' or ``pursuant to'' section 108; and (3) extend,
generally, to the guarantees authorized by section 222 all of the
statutory requirements of section 108, as required by section 222. One
of the principal revisions to the regulations in 24 CFR part 570,
subpart M, is to the definition of ``debt obligation.''
Existing Sec. 570.702 defines the term ``debt obligation'' to
mean: (1) A promissory note or other obligation issued by an eligible
public entity (local government) or its designated public agency and
guaranteed by HUD under subpart M, or (2) a trust certificate or other
obligation offered by HUD or by a trust or other offeror approved for
purposes of subpart M by HUD, which is guaranteed by HUD under subpart
M and is based on and backed by a trust or pool composed of notes or
other obligations issued by public entities or their designated public
agencies and guaranteed or eligible for guarantee by HUD under subpart
M. Existing subpart M does not restate the note guarantee authority and
trust certificate guarantee authority provided in section 108(a) and
section 108(r); therefore, there is no specific provision of the
current regulation that limits the scope of HUD's statutory guarantee
authority to ``debt obligations'' as so defined.
[[Page 36386]]
However, there are other statutory provisions that are restated in the
regulations, using the defined term ``debt obligation.'' So that these
provisions do not exclude the guarantees authorized by section 222, the
interim rule amends the definition of the term ``debt obligation.''
Specifically, the interim rule amends the definition of ``debt
obligation'' to make clear that, in addition to the obligations that
the term currently covers, debt obligation also encompasses a
promissory note or other obligation issued by a state and guaranteed by
HUD under subpart M. Additionally, ``debt obligation'' encompasses a
trust certificate or other obligation offered by HUD or by a trust or
other offeror approved for purposes of subpart M by HUD, and which is
guaranteed by HUD under subpart M and based on and backed by a trust or
pool composed of notes or other obligations issued by states and
guaranteed or eligible for guarantee by HUD under subpart M (either
alone, or in combination with notes or other obligations issued by
eligible public entities or their designated public agencies and
guaranteed or eligible for guarantee by HUD under subpart M).
In addition to this revision of the definition of ``debt
obligation,'' the interim rule adds a reference to ``state'' to several
provisions of subpart M in which reference is currently made only to
``public entity'' (local government), where this is necessary to ensure
that statutorily based provisions of the regulations cover the
guarantees authorized by section 222. (See revisions to Sec. Sec.
570.704, 570.705, 570.709, and 570.711.)
IV. Specific Provisions of This Interim Rule
This section highlights some of the more noteworthy provisions of
the interim rule. As described in section V of this preamble, HUD has
determined that good cause exists to publish this rule for effect
without prior solicitation of public comment. The Department, however,
recognizes the value and importance of public input in the rulemaking
process and is providing a 60-day public comment period. HUD welcomes
comment on all aspects of the interim rule, but specifically solicits
views on whether the regulatory changes will likely increase the
participation by states in the section 108 program, given their new
authority to participate in the program as issuers of obligations. All
comments received on the interim rule will be considered in the
development of the final rule.
Eligible Issuers
HUD interprets ``state'' in Section 222 to mean any state, as
defined in the HCD Act that has elected to administer the CDBG program
for its nonentitlement areas. The definition includes all of the
states, or any instrumentality of a state approved by its Governor,
except for the state of Hawaii. The state of Hawaii is excluded from
the definition because it has elected not to receive an annual grant
from HUD to administer a CDBG program for its nonentitlement areas,
and, therefore, is unable to make the pledge of CDBG funds required
under section 108. (The units of general local government in Hawaii's
nonentitlement areas, which currently are Hawaii, Kauai, and Maui
counties, receive annual CDBG grants directly from HUD and are eligible
to apply for section 108 loan guarantee assistance on their own
behalf.) The definition also includes the Commonwealth of Puerto Rico.
(See existing Sec. 570.3 and the language in new Sec. 570.711(a)
limiting eligible applicants to states that administer the CDBG
program.)
Distribution to Local Governments
Section 222 provides authority to guarantee and make commitments to
guarantee notes or other obligations issued by a state ``on behalf of
non-entitlement communities in the State,'' and it requires that ``any
State receiving such a guarantee or commitment shall distribute all
funds subject to such guarantee to the units of general local
government in nonentitlement areas that received the commitment.'' HUD
is implementing these provisions of section 222 by means of two
interrelated requirements that are added to the section 108 regulations
in a new Sec. 570.711.
First, a state applying for a loan guarantee commitment will be
required to identify, in its application, the local governments that
will be eligible to be assisted by the state with proceeds of loans
guaranteed pursuant to the commitment. Should HUD approve the
application and issue a commitment to the state, the local governments
so identified will be deemed to be the local governments that
``received the commitment'' (and obligations guaranteed pursuant to the
commitment will be deemed to be issued ``on behalf of'' those local
governments) for purposes of section 222. States may elect to identify
these local governments in either one of two ways: by naming one or
more specific nonentitlement local governments eligible to be assisted
(which may be desired when a state is applying for a loan guarantee to
fund a particular, known local project or projects) or by indicating
that all or a specified subset of the nonentitlement public entities in
the state are eligible to be assisted and describing how applications
will be selected for assistance. (See Sec. 570.711(a)(1).)
Second, the state will be permitted to use guaranteed loan funds
only to make grants and loans to the local governments identified in
its application for activities eligible under Sec. 570.703 of the
existing section 108 regulations. Proceeds may be used directly by the
state for payment of interest on the guaranteed obligation as described
in Sec. 570.703(c); for payment of issuance, underwriting, servicing,
trust administration, and other costs as described in Sec. 570.703(g);
and for debt service reserves as described in Sec. 570.703(k), because
these uses are for the purpose of financing the local governments'
activities. (See Sec. 570.711(b).) These limitations on permissible
uses of funds will be incorporated as a condition of the state's loan
guarantee commitment pursuant to Sec. 570.704(c)(4) of the existing
regulations, and as a term of the loan guarantee assistance contract
entered into pursuant to Sec. 570.705(b).
Application Process
As noted above, the interim rule requires a state to identify the
local governments eligible to be assisted through its loan guarantee
application, either by naming particular eligible local governments or
by indicating that all or a specified subset of the state's
nonentitlement local governments are eligible and describing the
state's application selection process. The interim rule requires states
to make this required identification of eligible local governments by
the exclusive means of including this information as a part of the CDBG
method of distribution described in the action plan submitted by the
state pursuant to 24 CFR part 91. In its action plan, the state will
also be required to note the approximate amount of outstanding section
108 guaranteed obligations issued by the state and by its
nonentitlement local governments, to identify the maximum amount of
guaranteed loan funds for which the state will apply during the period
covered by the action plan, and to describe the required pledge of the
state's CDBG funds. If the state's CDBG action plan, as most recently
submitted or amended when the state initially applies for a commitment,
does not include this information, the state will be required to amend
its action plan in accordance with 24 CFR part 91 to include such
information prior to
[[Page 36387]]
applying for the commitment. (See Sec. 570.711(a)(1).)
Other required elements of the State's application submission will
not be required to be included in the state's CDBG action plan; namely,
a proposed schedule for repayment of the loan that identifies the
sources of repayment and a description of the activities to be funded
and how such activities are eligible and meet national objective
criteria. The rule gives states the option of either including a
detailed description of activities for HUD review and approval at the
time of its application for a commitment (which may be desired when a
state is applying for a loan guarantee to fund a particular, known
local project or projects), or instead submitting a description of the
type or types of local government projects for which awards of grants
or loans will be made, indicating how these types of projects will be
eligible and how they are intended to meet national objective criteria.
In the latter case, the state will be required to obtain HUD review and
approval of a detailed activity-description before disbursing
guaranteed loan funds to a local government for the proposed activity.
This will accommodate states that may wish to apply for and receive a
loan guarantee commitment (and, if desired and if permitted by HUD,
receive a guarantee and escrow guaranteed loan funds) prior to
selecting particular local governments' projects for assistance, while
enabling the Department to carry out its responsibility to ensure that
activities funded under section 108 are eligible and meet national
objective criteria. (See Sec. 570.711(a)(2)-(3).)
Consistent with part 58 environmental review procedures applicable
to State-assisted units of general local government under the current
regulations, units of general local government will be required to
submit requests for release of funds and related certifications to the
appropriate HUD Field Office (rather than to the state), as described
in Sec. 570.704(d) of the existing regulations. (See Sec.
570.711(e).) HUD recognizes that some states may wish to require that
units of general local government submit such requests and
certifications to the state for initial review prior to submission to
the appropriate HUD Field Office. The regulations in 24 CFR part 58 and
24 CFR part 570 do not prohibit states from imposing such a
requirement.
Apart from these provisions regarding HUD review of activity
eligibility and national objective and environmental review procedures,
local governments to be assisted by a state will be subject to the
requirements of the state CDBG program (see 24 CFR subpart I),
including the citizen participation requirements in Sec. 570.486(a)
for local governments' applications to the state for assistance, and
the requirements in Sec. 570.606 related to displacement, relocation,
acquisition, and replacement of low- and moderate-income housing. (See
Sec. Sec. 570.707(b), 570.710, and 570.711(d) and (e).)
Certification With Respect to Other Financing Efforts and Need for
Guarantee
Section 108(a) provides, in relevant part, that ``A guarantee under
this section [Section 108] may be used to assist a grantee in obtaining
financing only if the grantee has made efforts to obtain such financing
without the use of such guarantee and cannot complete such financing
consistent with the timely execution of the program plans without such
guarantee.'' Consistent with this provision, HUD currently assures that
this requirement is satisfied by requiring each local government to
submit an appropriate certification when it applies for a commitment of
loan guarantee assistance, as provided in Sec. 570.704(b)(4) of the
existing regulations. Because the intent of this provision of section
108 is to assure that assistance is genuinely needed in order to be
able to carry out the eligible activity, and because the local
government that is planning the eligible activity is in the best
position to seek other financing for the activity and assess whether
such financing can timely be obtained, for section 222 guarantees HUD
is interpreting ``grantee'' in this provision to mean the assisted
local government, not the state issuer. This interpretation is
consistent with current practice: nonentitlement local governments will
only be required to make the same certification that they are currently
required to make when they apply to HUD for loan guarantee assistance.
This interim rule does not introduce an additional certification by the
state. Because states will have the option of issuing guaranteed
obligations and escrowing proceeds before local governments and
projects are selected for assistance, the interim rule gives states the
option of obtaining the required certification from each assisted local
government after HUD's guarantee, but before approving the local
government's application for assistance. (See Sec. 570.711(c).)
70/30 Allocation Provisions
Section 108(a) also provides, in relevant part, ``Of the amount
approved in any appropriation Act for guarantees under this section
[Section 108] in any fiscal year, the Secretary shall allocate 70
percent for guarantees for metropolitan cities, [and] urban counties *
* * and 30 percent for guarantees for units of general local government
in nonentitlement areas. The Secretary may waive the percentage
requirements of the preceding sentence in any fiscal year only to the
extent that there is an absence of qualified applicants or proposed
activities from metropolitan cities, [and] urban counties * * * or
units of general local government in nonentitlement areas.'' It is
HUD's view that states' applications for guarantees and guarantees made
pursuant to section 222, because they finance activities carried out by
the States' nonentitlement communities, constitute applications
``from,'' and guarantees ``for,'' ``units of general local government
in nonentitlement areas'' within the meaning of these provisions.
Accordingly, states applying for loan guarantees on behalf of their
nonentitlement communities will share the 30 percent allocation (to the
extent it is not waived in a given year) with nonentitlement
communities applying directly to HUD for loan guarantee assistance.
(See revisions to Sec. 570.709.)
Continuation of Authority in Future Legislation
The interim rule contains language that would continue the
applicability of the requirements and procedures described above in the
event that provisions equivalent to section 222 are included in future
appropriations acts. (See the introductory sentence of Sec. 570.711.)
V. Justification for Interim Rulemaking
HUD generally publishes regulatory changes for public comment
before issuing them for effect, in accordance with its own regulations
on rulemaking in 24 CFR part 10. Part 10, however, does provide in
Sec. 10.1 for exceptions from that general rule where the Department
finds good cause to omit advance notice and public participation. The
good cause requirement is satisfied when the prior public procedure is
``impracticable, unnecessary, or contrary to the public interest.'' The
Department finds that a delay in the effectiveness of this interim
rule, in order to solicit prior public comment, would be contrary to
the public interest and statutory direction.
Section 222 of the 2009 Appropriations Act directed HUD to
promulgate regulations implementing the administration of funds, as
specified in section 222 within 60 days of enactment of that 2009
Appropriations Act (May 11, 2009). Accordingly, it was
[[Page 36388]]
the intent and direction of Congress that the section 108 guarantees or
commitments authorized by the 2009 Appropriations Act be promptly made
available to states. Although HUD was unable to meet the statutory
deadline, it has strived to issue the regulations as close as possible
to May 11, 2009. To delay the effectiveness of this rule would delay
the benefits that Congress sought be immediately available to states,
and consequently to the public they serve.
The interim rule does not make significant changes to the section
108 program regulations. The interim rule primarily makes technical
changes to the regulations to implement the authority, provided to HUD
by section 222 of the 2009 Appropriations Act, to guarantee obligations
issued by states on behalf of their nonentitlement communities. To the
greatest extent possible, the interim rule maintains the long-standing
requirements for section 108 loan guarantees, which are familiar to
states and localities.
Given the limited scope, and technical nature, of the interim
regulatory amendments, a delay for the prior solicitation of comments
might unnecessarily delay the benefits of the new financing mechanism
authorized by the 2009 Appropriations Act. HUD also notes that its
authority to make loan guarantee commitments to states will expire on
September 30, 2010, and it is therefore important to implement this new
financing expeditiously, as directed by Congress in an effort to assure
that FY 2009 section 108 loan guarantee authority will be fully
committed before HUD's authority expires on September 30, 2010.
Although HUD has determined that good cause exists to publish this
rule for effect without prior solicitation of public comment, the
Department recognizes the value and importance of public input in the
rulemaking process. Accordingly, HUD is issuing these regulatory
amendments on an interim basis and providing for a 60-day public
comment period. All comments will be considered in the development of
the final rule.
VI. Findings and Certifications
Paperwork Reduction Act
The information collection requirements contained in this interim
rule have been approved by the Office of Management and Budget (OMB)
under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520) and
assigned control numbers 2506-0161, 2506-0117, and 2506-0085. In
accordance with the Paperwork Reduction Act, an agency may not conduct
or sponsor, and a person is not required to respond to, a collection of
information, unless the collection displays a currently valid OMB
control number.
Environmental Review
A Finding of No Significant Impact (FONSI) with respect to the
environment has been made in accordance with HUD regulations at 24 CFR
part 50, which implement section 102(2)(C) of the National
Environmental Policy Act of 1969 (42 U.S.C. 4332(2)(C)). The Finding of
No Significant Impact is available for public inspection between the
hours of 8 a.m. and 5 p.m. weekdays in the Regulations Division, Office
of General Counsel, Department of Housing and Urban Development, 451
7th Street, SW., Room 10276, Washington, DC 20410. Due to security
measures at the HUD Headquarters building, please schedule an
appointment to review the FONSI by calling the Regulations Division at
202-708-3055 (this is not a toll-free number). Individuals with speech
or hearing impairments may access this number via TTY by calling the
Federal Information Relay Service at 800-877-8339.
Federalism
Executive Order 13132 (entitled ``Federalism'') prohibits an agency
from publishing any rule that has federalism implications if the rule
either imposes substantial direct compliance costs on state and local
governments and is not required by statute, or the rule preempts state
law, unless the agency meets the consultation and funding requirements
of section 6 of the Executive Order. This proposed rule does not have
federalism implications and does not impose substantial direct
compliance costs on state and local governments nor preempt state law
within the meaning of the Executive Order.
Unfunded Mandates Reform Act
Title II of the Unfunded Mandates Reform Act of 1995 (2 U.S.C.
1531-1538) (UMRA) establishes requirements for federal agencies to
assess the effects of their regulatory actions on state, local, and
tribal governments, and on the private sector. This proposed rule does
not impose any federal mandates on any state, local, or tribal
governments, or on the private sector, within the meaning of UMRA.
Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et seq.)
generally requires an agency to conduct a regulatory flexibility
analysis of any rule subject to notice and comment rulemaking
requirements, unless the agency certifies that the rule will not have a
significant economic impact on a substantial number of small entities.
This rule would implement new statutory authority to provide an
additional, alternative route for states and their nonentitlement local
governments to obtain financing for eligible community development
projects. Specifically, the interim rule authorizes HUD to provide
community development loan guarantees to states borrowing on behalf of
local governments in nonentitlement areas. Therefore, the primary focus
of the interim regulatory amendments is on the states, which are
relatively large jurisdictions. Further, and as detailed in the
preamble above, the interim rule, to the greatest extent possible,
tracks the language of the authorizing statute. Accordingly, the
interim regulatory text reflects statutorily mandated requirements that
HUD does not have the discretion to modify. Where HUD has been granted
the discretion to elaborate on the statutory requirements, it has built
upon the existing requirements for section 108 loan guarantees, which
are familiar to States and localities. Moreover, these amendments are
technical, and procedural, relating to the distribution of funds to
local governments and the procedures to be followed by states in
applying for the loan guarantees authorized by the provision.
Therefore, it is HUD's determination that these revisions impose no
significant economic impact on a substantial number of small entities.
The undersigned certifies that this rule will not have a significant
impact on a substantial number of small entities.
Notwithstanding HUD's determination that this rule will not have a
significant effect on a substantial number of small entities, HUD
specifically invites comments regarding any less burdensome
alternatives to this rule that will meet HUD's objectives as described
in this preamble.
Catalog of Federal Domestic Assistance
The Catalog of Federal Domestic Assistance (CFDA) program number
for the state CDBG program is 14.228, and the CDFA program number for
the section 108 loan guarantee program is 14.248.
List of Subjects in 24 CFR Part 570
Administrative practice and procedure, American Samoa, Community
Development Block Grants, Grant programs--education, Grant programs--
housing and community
[[Page 36389]]
development, Guam, Indians, Loan programs--housing and community
development, Low and moderate income housing, Northern Mariana Islands,
Pacific Islands Trust Territory, Puerto Rico, Reporting and
recordkeeping requirements, Student aid, Virgin Islands.
0
Accordingly, for the reasons described in the preamble, 24 CFR part 570
is amended as follows:
PART 570--COMMUNITY DEVELOPMENT BLOCK GRANTS
0
1. The authority citation for 24 part 570 continues to read as follows:
Authority: 42 U.S.C. 5300-5320.
0
2. In Sec. 570.481, revise paragraph (a)(2) to read as follows:
Sec. 570.481 Definitions.
(a) * * *
(2) CDBG funds means Community Development Block Grant funds, in
the form of grants under this subpart and program income, and loans
guaranteed under section 108 of the Act.
0
3. In Sec. 570.701, revise the definitions of ``borrower'', ``debt
obligation'', ``guaranteed loan funds'', and ``state-assisted public
entity'' to read as follows:
Sec. 570.701 Definitions.
Borrower means the public entity or its designated public agency or
the State that issues debt obligations under this subpart.
Debt obligation means a promissory note or other obligation issued
by a public entity or its designated public agency or by a State and
guaranteed by HUD under this subpart, or a trust certificate or other
obligation offered by HUD or by a trust or other offeror approved for
purposes of this subpart by HUD, which is guaranteed by HUD under this
subpart and is based on and backed by a trust or pool composed of notes
or other obligations issued by public entities or their designated
public agencies or by States and guaranteed or eligible for guarantee
by HUD under this subpart.
* * * * *
Guaranteed loan funds means the proceeds payable to the borrower
from the issuance of debt obligations under this subpart and includes
funds received by a nonentitlement public entity from a State under
Sec. 570.711.
* * * * *
State-assisted public entity means a unit of general local
government in a nonentitlement area which is assisted by a State as
required in Sec. 570.704(b)(9) and Sec. 570.705(b)(2) or pursuant to
Sec. 570.711.
0
4. In Sec. 570.704, revise paragraph (c)(3)(i)(D), the first sentence
of paragraph (c)(4), and the first sentence of paragraph (c)(5) to read
as follows:
Sec. 570.704 Application requirements.
* * * * *
(c) * * *
(3) * * *
(i) * * *
(D) The public entity's or State's ability to furnish adequate
security pursuant to Sec. 570.705(b), and
* * * * *
(4) HUD will notify the public entity or State in writing that the
loan guarantee request has either been approved, reduced, or
disapproved. If the request is reduced or disapproved, the public
entity or State shall be informed of the specific reasons for reduction
or disapproval. * * *
(5) Amendments. If the public entity or State wishes to carry out
or assist in an activity not previously described in its application or
to substantially change the purpose, scope, location, or beneficiaries
of an activity, the amendment must be approved by HUD. * * *
* * * * *
0
5. In Sec. 570.705, revise paragraphs (a)(2)(ii) and (g) to read as
follows:
Sec. 570.705 Loan requirements.
(a) * * *
(2) * * *
(ii) States and State-assisted public entities. No commitment to
guarantee shall be made if the total unpaid balance of debt obligations
guaranteed under this subpart (excluding any amount defeased under the
contract entered into under Sec. 570.705(b)(1)) on behalf of the State
and all State-assisted public entities in the State would thereby
exceed an amount equal to five times the amount of the most recent
grant received by such State under subpart I.
* * * * *
(g) Issuance, underwriting, servicing, and other costs. Each public
entity or its designated public agency and each State issuing debt
obligations under this subpart must pay the issuance, underwriting,
servicing, trust administration, and other costs associated with the
private sector financing of the debt obligations. Such costs are
payable out of the guaranteed loan funds and shall be secured under
paragraph (b) of this section.
* * * * *
0
6. Revise Sec. 570.709 to read as follows:
Sec. 570.709 Allocation of loan guarantee assistance.
Of the amount approved in any appropriation act for guarantees
under this subpart in any fiscal year, 70 percent shall be allocated
for entitlement public entities and 30 percent shall be allocated for
States and nonentitlement public entities. HUD need not comply with
these percentage requirements in any fiscal year to the extent that
there is an absence of applications approvable under this subpart from
entitlement public entities or from States and nonentitlement public
entities.
0
7. In Sec. 570.710, revise the third sentence to read as follows:
Sec. 570.710 State responsibilities.
* * * Upon approval by HUD of an application from a State or a
State-assisted public entity, the State will be principally
responsible, subject to HUD oversight under subpart I of this part, for
ensuring compliance with all applicable requirements governing the use
of the guaranteed loan funds. * * *
0
8. Add a new Sec. 570.711 to read as follows:
Sec. 570.711 State borrowers; additional requirements and application
procedures.
This section contains additional requirements and alternative
application procedures for guarantees of debt obligations under section
108 of the Act pursuant to the additional authority provided in
paragraph (a) of section 222 of the Transportation, Housing and Urban
Development, and Related Agencies Appropriations Act, 2009, Public Law
111-8; 123 Stat. 524 at 976 (Division I of the Omnibus Appropriations
Act, 2009) (``section 222'' and the ``2009 Appropriations Act''). If
any other federal law or laws are enacted after March 11, 2009, the
effect of which with respect to loan guarantee authority provided in an
appropriations act is equivalent to the effect of section 222 with
respect to the loan guarantee authority provided in the 2009
Appropriations Act, the additional requirements and alternative
application procedures in this section shall also apply to guarantees
of debt obligations under section 108 of the act, pursuant to the
additional authority provided in such other federal law or laws.
(a) Applications by States. Notwithstanding Sec. 570.702 and Sec.
570.704, states that administer the CDBG program (under subpart I of
this part) may apply for loan guarantee assistance under this subpart,
and such application shall consist of the following:
[[Page 36390]]
(1) A copy of the State's CDBG method of distribution in the action
plan most recently submitted or amended pursuant to 24 CFR part 91. In
addition to the requirements of 24 CFR part 91, such method of
distribution must note the approximate amount of section 108 guaranteed
obligations issued by the State and all nonentitlement public entities
that are outstanding at the time of such submission or amendment,
identify the maximum amount of guaranteed loan funds for which the
State will apply during the period covered by the action plan, describe
the pledge of grants required under Sec. 570.705(b)(2), and identify
the nonentitlement public entities in the State that may be assisted
with such guaranteed loan funds (to satisfy this requirement, the
method of distribution may identify one or more specific nonentitlement
public entities that may be assisted, or may indicate that all or a
specified subset of the nonentitlement public entities in the State may
be assisted and describe how applications will be selected for
assistance).
(2) Either:
(i) A description of each activity to be carried out with the
guaranteed loan funds, including the specific provision of Sec.
570.703 under which the activity is eligible and how the activity meets
one of the criteria in Sec. 570.208; or
(ii) An indication of the type or types of activities to be
assisted, the provisions of Sec. 570.703 under which such activities
are eligible, and the criteria in Sec. 570.208 intended to be met, in
which case HUD shall require that the description referred to in
paragraph (a)(2)(i) of this section be submitted to and approved by HUD
before the State disburses guaranteed loan funds to a public entity for
the activity.
(3) A schedule for repayment of the loan which identifies the
sources of repayment.
(b) Distribution to Local Governments. Proceeds payable to a State
from the issuance of debt obligations under this subpart may be used
only for:
(1) Loans and grants to the nonentitlement public entities
identified in the State's approved application for activities eligible
under Sec. 570.703; and
(2) The uses specified in paragraphs (c), (g), and (k) of Sec.
570.703.
(c) Certification of need. Prior to approving a nonentitlement
public entity's application for assistance, the State shall obtain a
certification from such public entity conforming to Sec.
570.704(b)(4).
(d) Local government citizen participation requirements. The
presubmission and citizen participation requirements in Sec.
570.704(a) and the third sentence of Sec. 570.704(c)(5) shall not
apply with respect to nonentitlement public entities' applications to a
State for assistance under this section. Nonentitlement public entities
shall comply with the provisions of Sec. 570.486(a) with respect to
such applications and such assistance.
(e) Environmental review; displacement, relocation, acquisition,
and replacement of housing. Nonentitlement public entities assisted by
a State under this section shall comply with Sec. 570.704(d) and (e).
Dated: June 23, 2009.
Nelson R. Breg[oacute]n,
General Deputy Assistant Secretary for Community Planning and
Development.
[FR Doc. E9-17326 Filed 7-21-09; 8:45 am]
BILLING CODE 4210-67-P