Disaster Assistance Loan Program; Disaster Loan Credit and Collateral Requirements., 22859-22862 [2014-09183]

Download as PDF Federal Register / Vol. 79, No. 80 / Friday, April 25, 2014 / Rules and Regulations number, electronic mail address, or other means for communicating with the requester during business hours. * * * * * (g) Appeal of the denial of expedited processing. Any appeal of the determination to deny a request for expedited processing will be acted on expeditiously.’’ § 1004.9 [Amended] 12. Section 1004.9 is amended: a. In paragraph (a) introductory text, by adding at the end of the fifth sentence: ‘‘, which are determinations by Authorizing Officials or FOIA Officers.’’ ■ b. In paragraph (a)(4) by removing ‘‘five’’ and adding ‘‘ten’’ before ‘‘cents per page’’. ■ c. In paragraph (a)(6) by: ■ 1. Adding paragraph designation ‘‘(i)’’ before ‘‘With the exception of’’; ■ 2. Removing ‘‘81/2x11’’ and adding, in its place, ‘‘8-1/2x11’’; and ■ 3. Adding a paragraph (a)(6)(ii). ■ d. In paragraph (a)(7), amend the last sentence by: ■ 1. Removing ‘‘him’’; ■ 2. Removing ‘‘his’’ before ‘‘request’’ and adding, in its place, ‘‘the’’; and ■ 3. Adding ‘‘or her’’ before ‘‘needs at a lower cost.’’ ■ e. In paragraph (a)(8) by adding ‘‘appropriate’’ before ‘‘FOIA Officer’’. ■ f. In paragraph (b) by removing ‘‘Freedom of Information Officer’’ and adding, in its place, ‘‘FOIA Officers’’. ■ g. In paragraph (b)(8)(ii) by adding ‘‘or she’’ after ‘‘he’’ and, by removing ‘‘10’’ and adding, in its place, ‘‘20’’ before ‘‘working days from receipt of initial requests’’. The addition read as follows: Fees for providing records. (a) * * * (6) * * * (ii) When unusual or exceptional circumstances do not apply and time limits specified in the FOIA are not met, the DOE will not charge any search fees, or duplication fees for educational and non-commercial scientific institution requesters and requesters who are representatives of the news media. * * * * * WREIER-AVILES on DSK5TPTVN1PROD with RULES § 1004.10 [Amended] 13. Section 1004.10 is amended: a. In paragraph (b)(3)(i) by removing ‘‘, or’’ after ‘‘issue’’ and adding, in its place, ‘‘;’’, ■ b. In paragraph (b)(3)(ii) by adding ‘‘or’’ after ‘‘exemption’’, and ■ c. By adding (b)(3)(iii) to read as follows: ■ ■ § 1004.10 Exemptions. * * * VerDate Mar<15>2010 * § 1004.11 [Amended] 14. Section 1004.11(h) is amended by adding in the third sentence, ‘‘excluding paragraph (f)(5)’’ after ‘‘paragraph (f) of this section.’’ ■ ■ ■ § 1004.9 (b) * * * (3) * * * (iii) If enacted after the date of enactment of the OPEN FOIA Act of 2009, specifically cites to Exemption 3 of the FOIA, 5 U.S.C. 552(b)(3). * * * * * * 14:58 Apr 24, 2014 Jkt 232001 [FR Doc. 2014–07449 Filed 4–24–14; 8:45 am] BILLING CODE 6450–01–P SMALL BUSINESS ADMINISTRATION 13 CFR Part 123 RIN 3245–AG61 Disaster Assistance Loan Program; Disaster Loan Credit and Collateral Requirements. U.S. Small Business Administration (SBA). ACTION: Interim Final Rule with request for comments. AGENCY: SBA is amending its disaster loan program regulations in response to Hurricane Sandy Rebuilding Task Force recommendations. One change allows SBA to rely on the disaster loan applicant’s credit, including credit score, rather than personal or business cash flow in order to assess repayment ability for those applicants with strong credit. Another change will increase the amount of disaster assistance funds that can be immediately disbursed to borrowers by raising the unsecured threshold for economic injury loans for all disasters and for physical damage loans for major disasters. Both of these changes will enable SBA to provide disaster assistance more quickly and efficiently. SUMMARY: Effective date: April 25, 2014. Applicability date: This rule is applicable for disasters declared on or after April 25, 2014. Comment date: Comments must be received on or before June 23, 2014. ADDRESSES: You may submit comments, identified by RIN 3245–AG61, by any of the following methods: (1) Federal Rulemaking Portal: https:// www.regulations.gov, following the specific instructions for submitting comments; (2) Fax: (202) 481–2336; or Email: James.Rivera@sba.gov; or (3) Mail/Hand Delivery/Courier: James E. Rivera, Associate Administrator for DATES: PO 00000 Frm 00005 Fmt 4700 Sfmt 4700 22859 Disaster Assistance, 409 3rd Street SW., Washington, DC 20416. SBA will post all comments to this interim final rule on www.regulations.gov. If you wish to submit confidential business information (CBI) as defined in the User Notice at www.regulations.gov, you must submit such information to U.S. Small Business Administration, Bartie J. Larsen, Office of Disaster Assistance, 409 Third Street SW., Mail Code 6530, Washington, DC 20416, or send an email to bartie.larsen@sba.gov. Highlight the information that you consider to be CBI and explain why you believe SBA should hold this information as confidential. SBA will review your information and determine whether it will make the information public. FOR FURTHER INFORMATION CONTACT: Bartie J. Larsen, Office of Disaster Assistance, 202–205–6734 or Bartie.Larsen@sba.gov. SUPPLEMENTARY INFORMATION: I. Background The Hurricane Sandy Rebuilding Task Force was established pursuant to an Executive Order issued on December 7, 2012, E.O. 13632, Establishing the Hurricane Sandy Task Force (December 7, 2012). This Task Force was established to ensure the recovery effort benefitted from cabinet-level focus and coordination, and was charged with establishing guidelines for the investment of Federal funds made available for the recovery. With the Secretary of Housing and Urban Development as its Chair, the Task Force consisted of the heads of twenty-three executive department agencies and offices. As a member of this task force, SBA collaborated with these executive agencies and offices to identify and work to remove obstacles to resilient rebuilding while taking into account existing and future risks and promoting the long-term sustainability of communities and ecosystems in the Sandy-affected region. The resultant Rebuilding Strategy developed by the Task Force included recommendations across several policy areas. See https:// portal.hud.gov/hud portal/documents/ huddoc?id=HSRebuildingStrategy.pdf. The Task Force recommended that SBA, among other recommendations, (a) institute new and innovated process improvements to SBA’s Disaster Loan program, and (b) increase SBA’s unsecured disaster loan limits in order to expedite the disbursement of small dollar loans. II. Explanation of Changes SBA is incorporating the Task Force’s recommendation to institute new and E:\FR\FM\25APR1.SGM 25APR1 WREIER-AVILES on DSK5TPTVN1PROD with RULES 22860 Federal Register / Vol. 79, No. 80 / Friday, April 25, 2014 / Rules and Regulations innovated process improvements to SBA’s Disaster Loan Program by amending 13 CFR 123.6 of SBA regulations to allow SBA to rely on a disaster applicant’s credit, including score, as evidence of repayment ability. The current language of § 123.6 requires SBA to analyze every applicant’s personal or business cash flow, which is a time consuming process. The interim final rule revises § 123.6 to allow SBA to base its repayment ability determination on either the applicant’s cash flow or credit, including credit score. The repayment analysis will still include the verification of income/ employment through Federal income tax returns. SBA also still plans to analyze personal or business cash flow to determine repayment ability for those applicants that do not have strong credit, as determined by SBA. However, removing the requirement to analyze cash flow for all loans allows SBA to expedite processing of applications from disaster victims with strong credit. Expediting the approval of disaster loan applications with strong credit will make processing more efficient because SBA can then dedicate additional staff to applications that do not have strong credit, thereby reducing overall processing time for all loans. This change is also a result of SBA’s Retrospective Regulatory Review efforts, specifically the ‘‘Accelerated Approval Disaster Loans Based on Credit Scores’’ project in SBA’s Final Plan for Retrospective Analysis of Existing Rules (available at https://www.sba.gov/aboutSba/sba_performance/strategic planning/sba_final _plan_for_ retrospective_analysis_of_existing_ rules). SBA is also revising 13 CFR 123.11 to incorporate the Task Force’s recommendation to increase SBA’s unsecured disaster loan limits. SBA’s current limits on unsecured disaster loans, which do not require collateral, are $14,000 for physical damage and $5,000 for economic injury. The revised regulations will raise the unsecured limit to $25,000 for economic injury loans for all disasters and for physical damage loans for major disasters. The unsecured limit for physical damage loans for non-major disasters will continue to be $14,000, in accordance with the Small Business Act. With these increased limits, more businesses, homeowners, and other potential victims that may be impacted by future disasters will receive much-needed small dollar loans more quickly following a disaster. The above changes apply to all eligible recipients of SBA disaster loans VerDate Mar<15>2010 14:58 Apr 24, 2014 Jkt 232001 for disasters declared on or after April 25, 2014. III. Justification for Interim Final Rule In general, SBA publishes a rule for public comment before issuing a final rule, in accordance with the Administrative Procedure Act, 5 U.S.C. 553. The Administrative Procedure Act provides an exception to this standard rulemaking process, however, where an agency finds good cause to adopt a rule without prior public participation. 5 U.S.C. 553(b)(3)(B). The good cause requirement is satisfied when prior public participation is impracticable, unnecessary, or contrary to the public interest. Under such circumstances, an agency may publish an interim final rule without soliciting public comment. Disasters are unpredictable and can happen with very little notice. Since SBA cannot predict the occurrence or magnitude of disasters, it reserves the right to change the rules governing SBA disaster assistance loans without advance notice, by publishing interim regulations in the Federal Register. 13 CFR 123.1. Advance solicitation of comments for this rulemaking would be impracticable and contrary to the public interest as it would prevent expedited processing and disbursement of disaster loans. Any such delay may cause undue hardship to homeowners, businesses and their communities as they struggle to recover from future disasters. SBA invites comments from all interested members of the public. These comments must be received on or before the close of the comment period noted in the DATES section of this interim final rule. SBA will then consider these comments in making any necessary revisions to these regulations. IV. Justification for Immediate Effective Date The APA requires that ‘‘publication or service of a substantive rule shall be made not less than 30 days before its effective date, except as—otherwise provided by the agency for good cause found and published with the rule.’’ 5 U.S.C. 553(d)(3). The purpose of this provision is to provide interested and affected members of the public sufficient time to adjust their behavior before the rule takes effect. SBA’s disaster loan program offers low interest, fixed rate loans to disaster victims, enabling them to replace property damaged or destroyed in declared disasters. It also offers such loans to affected small businesses and non-profits to help them recover from economic injury caused by such disasters. The changes in this interim final rule will not require members of PO 00000 Frm 00006 Fmt 4700 Sfmt 4700 the public to adjust their behavior. Rather, the changes will benefit the public by expediting the processing and disbursement of SBA disaster loans. In light of the urgent need to assist disaster victims, SBA finds that there is good cause for making this rule effective immediately instead of observing the 30-day period between publication and effective date. While this interim final rule is effective immediately upon publication, SBA is inviting public comment on the rule during a 60-day period and will consider the comments in developing a final rule. SBA has included an applicability date to make clear that the rule is applicable for disasters declared on or after the date of publication in the Federal Register in order to make these changes available to future disaster victims as soon as possible. Compliance With Executive Orders 12866, 12988, 13132, and 13563 and the Paperwork Reduction Act (44 U.S.C. Ch. 35) and the Regulatory Flexibility Act (5 U.S.C. 601–612) Executive Order 12866 The Office of Management and Budget (OMB) has determined that this interim final rule is a significant regulatory action for the purposes of Executive Order 12866. Accordingly, the next section contains SBA’s Regulatory Impact Analysis. However, this is not a major rule under the Congressional Review Act, 5 U.S.C. 800. A. Regulatory Objective of the Proposal SBA is amending its disaster loan program regulations in response to Hurricane Sandy Rebuilding Task Force recommendations to (a) institute new and innovative process improvements to SBA’s Disaster Loan program; and (b) increase SBA’s unsecured disaster loan limits in order to expedite the disbursement of small dollar loans. Amending § 123.6 of SBA regulations will allow SBA to rely on a disaster loan applicant’s credit, including credit score, in order to assess repayment ability. Amending § 123.11 will raise SBA’s limits on unsecured disaster loans (currently $14,000 for physical damage and $5,000 for economic injury) to $25,000 for economic injury loans for all disasters and for physical damage loans for major disasters. B. Benefits of the Rule This interim final rule will directly benefit disaster victims by decreasing the amount of time required by SBA to process disaster loan applications and increasing the amount of loan proceeds available for disbursement without collateral. Credit scoring will allow for E:\FR\FM\25APR1.SGM 25APR1 Federal Register / Vol. 79, No. 80 / Friday, April 25, 2014 / Rules and Regulations WREIER-AVILES on DSK5TPTVN1PROD with RULES a more expeditious approval process because SBA will not be constrained by the requirement to conduct a complete cash flow analysis for every loan (which includes debt reconciliation and a repayment analysis to determine if there are funds available for both loan payments and day-to-day living expenses). Removing the requirement to analyze cash flow for all loans allows SBA to expedite processing of applications from disaster victims with strong credit, which will allow SBA to dedicate more staff to more timeconsuming applications, thereby reducing overall processing time for all loans. This change is also a result of SBA’s Retrospective Regulatory Review efforts, specifically the ‘‘Accelerated Approval Disaster Loans Based on Credit Scores’’ project in SBA’s Final Plan for Retrospective Analysis of Existing Rules (available at https:// www.sba.gov/about-Sba/sba_ performance/strategic_planning/sba_ final_plan_for_retrospective_analysis_of existing rules). Increasing the unsecured loan threshold for economic injury loans for all disasters and for physical damage loans for major disasters to $25,000 will also benefit disaster victims. Currently, SBA can only disburse up to $5,000 for economic injury loans and up to $14,000 for physical damage loans prior to obtaining the appropriate security instruments. This increase will allow SBA to quickly disburse more funds to disaster victims. For example, under certain circumstances SBA may require additional documentation to disburse funds above the unsecured limit (e.g., a building permit is required prior to any disbursement for repairs above $14,000 to property that secures the Joan). Unsecured loans, however, require only limited documentation: An executed note, loan authorization and agreement, and proof of flood insurance if the property is located in a Special Flood Hazard Zone. Because there is less documentation to collect and review, SBA can disburse funds below the unsecured loan threshold much more quickly. ability for those applicants who do not have strong credit. C. Costs of the Rule The calculated subsidy from the proposed changes has no significant impact on the overall subsidy rate. In addition, the rule will not result in any additional costs to disaster victims. Although SBA will use expedited processing to approve loan applications from disaster victims with strong credit, loan applications will not be declined based solely on credit scores. SBA still plans to analyze personal or business cash flow to determine repayment SBA has determined that this interim final rule will not have substantial direct effects on the States, on the relationship between the national government and the States, or the distribution of power and responsibilities among the various levels of government. Therefore, for the purposes of Executive Order 13132, SBA has determined that this interim final rule has no federalism implications warranting preparation of a federalism assessment. VerDate Mar<15>2010 14:58 Apr 24, 2014 Jkt 232001 D. Alternatives Working with the other members of the Hurricane Sandy Rebuilding Task Force, SBA determined that these regulatory changes are the best available means of achieving the Task Force’s goals of instituting new and innovated process improvements to SBA’s Disaster Loan program and increasing SBA’s unsecured disaster loan limits. SBA has already made several nonregulatory changes to implement the Sandy Task Force’s recommendation to institute new and innovated process improvements to the disaster loan program. For example, SBA has implemented a process of separate application tracks for business and home disaster loans, which allows SBA to process business disaster loans more quickly. In addition, SBA has established a new training module for reserve disaster loan officers based on efficiencies and improvements identified in an analysis of the Hurricane Sandy response to ensure that a trained reserve staff is in place for future disasters. However, in order to fully implement the recommendations of the Task Force, SBA must revise its regulations to allow SBA to base its repayment ability determination on either the applicant’s cash flow or credit, including credit score, and to increase the unsecured disaster loan limits. Executive Order 12988 This action meets applicable standards set forth in sections 3(a) and 3(b)(2) of Executive Order 12988, Civil Justice Reform, to minimize litigation, eliminate ambiguity, and reduce burden. The action does not have preemptive effect. The final rule will not have retroactive effect and will not apply to disasters declared before April 25, 2014. Executive Order 13132 PO 00000 Frm 00007 Fmt 4700 Sfmt 4700 22861 Executive Order 12866 and 13563 Executive Order 13563 reaffirms the principles of E.O. 12866 while calling for improvements in the nation’s regulatory system to promote predictability, to reduce uncertainty, and to use the best, most innovative, and least burdensome tools for achieving regulatory ends. The executive order directs agencies to consider regulatory approaches that reduce burdens and maintain flexibility and freedom of choice for the public where these approaches are relevant, feasible, and consistent with regulatory objectives. E.O. 13563 also requires that regulations be based on the open exchange of information and perspectives among state and local officials, affected stakeholders in the private sector, and the public as a whole. In developing this rule, SBA collaborated with multiple agencies through its participation on Hurricane Sandy Rebuilding Task Force. The Task Force was led by the Secretary of Housing and Urban Development, and included twenty-three executive department agencies and offices. The Task Force worked with these Federal agency members as well as state and local officials to identify areas where immediate steps could be taken to help communities recovering from Hurricane Sandy. SBA continues to communicate with the other members of the Task Force via monthly progress reports. Executive Order 13563 also recognizes the importance of maintaining a consistent culture of retrospective review and analysis throughout the executive branch. SBA had identified revisions to § 123.6 to expedite approval of disaster loans based on credit score as a part of its retrospective review. As stated in that report, an analysis of the performance of disaster loans to borrowers with strong credit indicated limited risk. Changing the current process of requiring a cash flow analysis for all loan applications would allow SBA more flexibility to design a loan approval that is in line with current private sector practices and reduce the processing cost for disaster loans. Paperwork Reduction Act (44 U.S.C. Ch. 35) For the purpose of the Paperwork Reduction Act, 44 U.S.C. Ch. 35, SBA has determined that this interim final rule would not impose any new reporting or recordkeeping requirements. E:\FR\FM\25APR1.SGM 25APR1 22862 Federal Register / Vol. 79, No. 80 / Friday, April 25, 2014 / Rules and Regulations Regulatory Flexibility Act (5 U.S.C. 601– 612) § 123.11 Does SBA require collateral for any of its disaster loans? The Regulatory Flexibility Act (RFA), 5 U.S.C. 601 requires administrative agencies to consider the effect of their actions on small entities, including small businesses. According to the RFA, when an agency issues a rule, the agency must prepare an analysis to determine whether the impact of the rule will have a significant economic impact on a substantial number of small entities. However, the RFA requires such analysis only where notice and comment rulemaking is required. Rules are exempt from the APA notice and comment requirements when the agency for good cause finds that notice and public procedure thereon is impracticable, unnecessary, or contrary to the public interest. SBA has determined that there is good cause to adopt this interim final rule without prior public participation; therefore, the rule is also exempt from the RFA requirements. SBA invites comments on this determination. 1. The authority citation for part 123 continues to read as follows: (a) When collateral is not required: (1) Economic injury disaster loans. Generally, SBA will not require that you pledge collateral to secure an economic injury disaster loan of $25,000 or less. (2) Physical disaster home and physical disaster business loans. SBA will not require that you pledge collateral to secure a physical disaster home or physical disaster business loan of $14,000 or less. In addition, under a Major Disaster, SBA generally will not require that you pledge collateral to secure a physical disaster home or physical disaster business loan of $25,000 or less. (3) IDAP loans. Collateral requirements for IDAP loans are set forth in Subpart H of this part. (4) Military Reservist EIDL. For the purposes of the Military Reservist EIDL only, as described in section 123.513, SBA will not generally require that you pledge collateral to secure a loan of $50,000 or less. (b) For loans larger than the amounts outlined in paragraph (a) of this section, you will be required to provide available collateral such as a lien on the damaged or replacement property, a security interest in personal/business property, or both. (c) * * * In deciding whether collateral is required, SBA will add up all physical disaster loans to see if they exceed the applicable unsecured threshold outlined in paragraph (a)(2) of this section and all economic injury disaster loans to see if they exceed $25,000. * * * * * Authority: 15 U.S.C. 632, 634(b) (6), 636(b), 636(d), 657n; Pub. L. 102–395, 106 Stat. 1828, 1864; Pub. L. 103–75, 107 Stat. 739; and Pub. L. 106–50, 113 Stat. 245. Dated: April 16, 2014. Maria Contreras-Sweet, Administrator. List of Subjects in 13 CFR Part 123 Disaster assistance, Loan programsbusiness, Reporting and recordkeeping requirements, Small businesses, Terrorism. For reasons set forth in the preamble, SBA amends 13 CFR part 123 as follows: PART 123—DISASTER LOAN PROGRAM ■ 2. Amend § 123.6 by revising the first sentence to read as follows: ■ WREIER-AVILES on DSK5TPTVN1PROD with RULES § 123.6 What does SBA look for when considering a disaster loan applicant? VerDate Mar<15>2010 14:58 Apr 24, 2014 Jkt 232001 Good Cause for Immediate Adoption Federal Aviation Administration Title 5, United States Code (U.S.C.) § 553(b)(3)(B) authorizes agencies to dispense with notice and comment procedures for rules when the agency for ‘‘good cause’’ finds that those procedures are ‘‘impracticable, unnecessary, or contrary to the public interest.’’ In this instance, the FAA finds that notice and public comment to this immediately adopted final rule, as well as any delay in the effective date of this rule, are contrary to the public interest due to the immediate need to address the potential hazard to civil aviation that now exists in a portion of the Simferopol (UKFV) FIR, as described in the Background section of this notice. 14 CFR Part 91 Authority for This Rulemaking [Docket No.: FAA–2014–0225; Amdt. No. 91–331] The FAA is responsible for the safety of flight in the United States (U.S.) and for the safety of U.S. civil operators, U.S.-registered aircraft, and U.S.certificated airmen throughout the world. The FAA’s authority to issue rules on aviation safety is found in 49 U.S.C. Subtitle I, section 106(f), describes the authority of the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the agency’s authority. Section [FR Doc. 2014–09183 Filed 4–24–14; 8:45 am] BILLING CODE 8025–01–P DEPARTMENT OF TRANSPORTATION There must be reasonable assurance that you can repay your loan based on SBA’s analysis of your credit or your personal or business cash flow, and you must also have satisfactory character.* * * ■ 3. Amend § 123.11 as follows: ■ a. Remove the introductory text and paragraph (c); ■ b. Redesignate paragraphs (a) and (b) as (c) and (d) ■ c. Add new paragraphs (a) and (b); and ■ d. Revise the second sentence of newly redesignated paragraph (c) to read as follows. This action prohibits certain flight operations in a portion of the Simferopol (UKFV) Flight Information Region (FIR) by all U.S. air carriers; U.S. commercial operators; persons exercising the privileges of a U.S. airman certificate, except when such persons are operating a U.S.-registered aircraft for a foreign air carrier; and operators of U.S.-registered civil aircraft, except when such operators are foreign air carriers. The FAA finds this action to be necessary to prevent a potential hazard to persons and aircraft engaged in such flight operations. DATES: This final rule is effective on April 25, 2014, and remains in effect through April 27, 2015. FOR FURTHER INFORMATION CONTACT: For technical questions concerning this action, contact Will Gonzalez, Air Transportation Division, Flight Standards Service Federal Aviation Administration, 800 Independence Avenue SW., Washington, DC 20591; telephone 202–267–8166; email will.gonzalez@faa.gov. For legal questions concerning this action, contact Robert Frenzel, Office of the Chief Counsel, AGC–200, Federal Aviation Administration, 800 Independence Avenue SW., Washington, DC 20591; telephone (202) 267–7638; email robert.frenzel@faa.gov. SUPPLEMENTARY INFORMATION: SUMMARY: RIN 2120–AK50 Prohibition Against Certain Flights in the Simferopol (UKFV) Flight Information Region (FIR) Federal Aviation Administration (FAA), DOT. ACTION: Immediately adopted final rule. AGENCY: PO 00000 Frm 00008 Fmt 4700 Sfmt 4700 E:\FR\FM\25APR1.SGM 25APR1

Agencies

[Federal Register Volume 79, Number 80 (Friday, April 25, 2014)]
[Rules and Regulations]
[Pages 22859-22862]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-09183]


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SMALL BUSINESS ADMINISTRATION

13 CFR Part 123

RIN 3245-AG61


Disaster Assistance Loan Program; Disaster Loan Credit and 
Collateral Requirements.

AGENCY: U.S. Small Business Administration (SBA).

ACTION: Interim Final Rule with request for comments.

-----------------------------------------------------------------------

SUMMARY: SBA is amending its disaster loan program regulations in 
response to Hurricane Sandy Rebuilding Task Force recommendations. One 
change allows SBA to rely on the disaster loan applicant's credit, 
including credit score, rather than personal or business cash flow in 
order to assess repayment ability for those applicants with strong 
credit.
    Another change will increase the amount of disaster assistance 
funds that can be immediately disbursed to borrowers by raising the 
unsecured threshold for economic injury loans for all disasters and for 
physical damage loans for major disasters. Both of these changes will 
enable SBA to provide disaster assistance more quickly and efficiently.

DATES: Effective date: April 25, 2014.
    Applicability date: This rule is applicable for disasters declared 
on or after April 25, 2014.
    Comment date: Comments must be received on or before June 23, 2014.

ADDRESSES: You may submit comments, identified by RIN 3245-AG61, by any 
of the following methods: (1) Federal Rulemaking Portal: https://www.regulations.gov, following the specific instructions for submitting 
comments; (2) Fax: (202) 481-2336; or Email: James.Rivera@sba.gov; or 
(3) Mail/Hand Delivery/Courier: James E. Rivera, Associate 
Administrator for Disaster Assistance, 409 3rd Street SW., Washington, 
DC 20416.
    SBA will post all comments to this interim final rule on 
www.regulations.gov. If you wish to submit confidential business 
information (CBI) as defined in the User Notice at www.regulations.gov, 
you must submit such information to U.S. Small Business Administration, 
Bartie J. Larsen, Office of Disaster Assistance, 409 Third Street SW., 
Mail Code 6530, Washington, DC 20416, or send an email to 
bartie.larsen@sba.gov. Highlight the information that you consider to 
be CBI and explain why you believe SBA should hold this information as 
confidential. SBA will review your information and determine whether it 
will make the information public.

FOR FURTHER INFORMATION CONTACT: Bartie J. Larsen, Office of Disaster 
Assistance, 202-205-6734 or Bartie.Larsen@sba.gov.

SUPPLEMENTARY INFORMATION:

I. Background

    The Hurricane Sandy Rebuilding Task Force was established pursuant 
to an Executive Order issued on December 7, 2012, E.O. 13632, 
Establishing the Hurricane Sandy Task Force (December 7, 2012). This 
Task Force was established to ensure the recovery effort benefitted 
from cabinet-level focus and coordination, and was charged with 
establishing guidelines for the investment of Federal funds made 
available for the recovery.
    With the Secretary of Housing and Urban Development as its Chair, 
the Task Force consisted of the heads of twenty-three executive 
department agencies and offices. As a member of this task force, SBA 
collaborated with these executive agencies and offices to identify and 
work to remove obstacles to resilient rebuilding while taking into 
account existing and future risks and promoting the long-term 
sustainability of communities and ecosystems in the Sandy-affected 
region. The resultant Rebuilding Strategy developed by the Task Force 
included recommendations across several policy areas. See https://portal.hud.gov/hud portal/documents/huddoc?id=HSRebuildingStrategy.pdf. 
The Task Force recommended that SBA, among other recommendations, (a) 
institute new and innovated process improvements to SBA's Disaster Loan 
program, and (b) increase SBA's unsecured disaster loan limits in order 
to expedite the disbursement of small dollar loans.

II. Explanation of Changes

    SBA is incorporating the Task Force's recommendation to institute 
new and

[[Page 22860]]

innovated process improvements to SBA's Disaster Loan Program by 
amending 13 CFR 123.6 of SBA regulations to allow SBA to rely on a 
disaster applicant's credit, including score, as evidence of repayment 
ability. The current language of Sec.  123.6 requires SBA to analyze 
every applicant's personal or business cash flow, which is a time 
consuming process. The interim final rule revises Sec.  123.6 to allow 
SBA to base its repayment ability determination on either the 
applicant's cash flow or credit, including credit score. The repayment 
analysis will still include the verification of income/employment 
through Federal income tax returns. SBA also still plans to analyze 
personal or business cash flow to determine repayment ability for those 
applicants that do not have strong credit, as determined by SBA. 
However, removing the requirement to analyze cash flow for all loans 
allows SBA to expedite processing of applications from disaster victims 
with strong credit. Expediting the approval of disaster loan 
applications with strong credit will make processing more efficient 
because SBA can then dedicate additional staff to applications that do 
not have strong credit, thereby reducing overall processing time for 
all loans. This change is also a result of SBA's Retrospective 
Regulatory Review efforts, specifically the ``Accelerated Approval 
Disaster Loans Based on Credit Scores'' project in SBA's Final Plan for 
Retrospective Analysis of Existing Rules (available at https://www.sba.gov/about-Sba/sba_performance/strategic planning/sba--final --
plan--for--retrospective--analysis--of--existing--rules).
    SBA is also revising 13 CFR 123.11 to incorporate the Task Force's 
recommendation to increase SBA's unsecured disaster loan limits. SBA's 
current limits on unsecured disaster loans, which do not require 
collateral, are $14,000 for physical damage and $5,000 for economic 
injury. The revised regulations will raise the unsecured limit to 
$25,000 for economic injury loans for all disasters and for physical 
damage loans for major disasters. The unsecured limit for physical 
damage loans for non-major disasters will continue to be $14,000, in 
accordance with the Small Business Act. With these increased limits, 
more businesses, homeowners, and other potential victims that may be 
impacted by future disasters will receive much-needed small dollar 
loans more quickly following a disaster.
    The above changes apply to all eligible recipients of SBA disaster 
loans for disasters declared on or after April 25, 2014.

III. Justification for Interim Final Rule

    In general, SBA publishes a rule for public comment before issuing 
a final rule, in accordance with the Administrative Procedure Act, 5 
U.S.C. 553. The Administrative Procedure Act provides an exception to 
this standard rulemaking process, however, where an agency finds good 
cause to adopt a rule without prior public participation. 5 U.S.C. 
553(b)(3)(B). The good cause requirement is satisfied when prior public 
participation is impracticable, unnecessary, or contrary to the public 
interest. Under such circumstances, an agency may publish an interim 
final rule without soliciting public comment.
    Disasters are unpredictable and can happen with very little notice. 
Since SBA cannot predict the occurrence or magnitude of disasters, it 
reserves the right to change the rules governing SBA disaster 
assistance loans without advance notice, by publishing interim 
regulations in the Federal Register. 13 CFR 123.1. Advance solicitation 
of comments for this rulemaking would be impracticable and contrary to 
the public interest as it would prevent expedited processing and 
disbursement of disaster loans. Any such delay may cause undue hardship 
to homeowners, businesses and their communities as they struggle to 
recover from future disasters.
    SBA invites comments from all interested members of the public. 
These comments must be received on or before the close of the comment 
period noted in the DATES section of this interim final rule. SBA will 
then consider these comments in making any necessary revisions to these 
regulations.

IV. Justification for Immediate Effective Date

    The APA requires that ``publication or service of a substantive 
rule shall be made not less than 30 days before its effective date, 
except as--otherwise provided by the agency for good cause found and 
published with the rule.'' 5 U.S.C. 553(d)(3). The purpose of this 
provision is to provide interested and affected members of the public 
sufficient time to adjust their behavior before the rule takes effect.
    SBA's disaster loan program offers low interest, fixed rate loans 
to disaster victims, enabling them to replace property damaged or 
destroyed in declared disasters. It also offers such loans to affected 
small businesses and non-profits to help them recover from economic 
injury caused by such disasters. The changes in this interim final rule 
will not require members of the public to adjust their behavior. 
Rather, the changes will benefit the public by expediting the 
processing and disbursement of SBA disaster loans.
    In light of the urgent need to assist disaster victims, SBA finds 
that there is good cause for making this rule effective immediately 
instead of observing the 30-day period between publication and 
effective date. While this interim final rule is effective immediately 
upon publication, SBA is inviting public comment on the rule during a 
60-day period and will consider the comments in developing a final 
rule. SBA has included an applicability date to make clear that the 
rule is applicable for disasters declared on or after the date of 
publication in the Federal Register in order to make these changes 
available to future disaster victims as soon as possible.

Compliance With Executive Orders 12866, 12988, 13132, and 13563 and the 
Paperwork Reduction Act (44 U.S.C. Ch. 35) and the Regulatory 
Flexibility Act (5 U.S.C. 601-612)

Executive Order 12866

    The Office of Management and Budget (OMB) has determined that this 
interim final rule is a significant regulatory action for the purposes 
of Executive Order 12866. Accordingly, the next section contains SBA's 
Regulatory Impact Analysis. However, this is not a major rule under the 
Congressional Review Act, 5 U.S.C. 800.
A. Regulatory Objective of the Proposal
    SBA is amending its disaster loan program regulations in response 
to Hurricane Sandy Rebuilding Task Force recommendations to (a) 
institute new and innovative process improvements to SBA's Disaster 
Loan program; and (b) increase SBA's unsecured disaster loan limits in 
order to expedite the disbursement of small dollar loans. Amending 
Sec.  123.6 of SBA regulations will allow SBA to rely on a disaster 
loan applicant's credit, including credit score, in order to assess 
repayment ability. Amending Sec.  123.11 will raise SBA's limits on 
unsecured disaster loans (currently $14,000 for physical damage and 
$5,000 for economic injury) to $25,000 for economic injury loans for 
all disasters and for physical damage loans for major disasters.
B. Benefits of the Rule
    This interim final rule will directly benefit disaster victims by 
decreasing the amount of time required by SBA to process disaster loan 
applications and increasing the amount of loan proceeds available for 
disbursement without collateral. Credit scoring will allow for

[[Page 22861]]

a more expeditious approval process because SBA will not be constrained 
by the requirement to conduct a complete cash flow analysis for every 
loan (which includes debt reconciliation and a repayment analysis to 
determine if there are funds available for both loan payments and day-
to-day living expenses). Removing the requirement to analyze cash flow 
for all loans allows SBA to expedite processing of applications from 
disaster victims with strong credit, which will allow SBA to dedicate 
more staff to more time-consuming applications, thereby reducing 
overall processing time for all loans. This change is also a result of 
SBA's Retrospective Regulatory Review efforts, specifically the 
``Accelerated Approval Disaster Loans Based on Credit Scores'' project 
in SBA's Final Plan for Retrospective Analysis of Existing Rules 
(available at https://www.sba.gov/about-Sba/sba_performance/strategic--
planning/sba--final--plan--for--retrospective--analysis--of existing 
rules).
    Increasing the unsecured loan threshold for economic injury loans 
for all disasters and for physical damage loans for major disasters to 
$25,000 will also benefit disaster victims. Currently, SBA can only 
disburse up to $5,000 for economic injury loans and up to $14,000 for 
physical damage loans prior to obtaining the appropriate security 
instruments. This increase will allow SBA to quickly disburse more 
funds to disaster victims. For example, under certain circumstances SBA 
may require additional documentation to disburse funds above the 
unsecured limit (e.g., a building permit is required prior to any 
disbursement for repairs above $14,000 to property that secures the 
Joan). Unsecured loans, however, require only limited documentation: An 
executed note, loan authorization and agreement, and proof of flood 
insurance if the property is located in a Special Flood Hazard Zone. 
Because there is less documentation to collect and review, SBA can 
disburse funds below the unsecured loan threshold much more quickly.
C. Costs of the Rule
    The calculated subsidy from the proposed changes has no significant 
impact on the overall subsidy rate. In addition, the rule will not 
result in any additional costs to disaster victims. Although SBA will 
use expedited processing to approve loan applications from disaster 
victims with strong credit, loan applications will not be declined 
based solely on credit scores. SBA still plans to analyze personal or 
business cash flow to determine repayment ability for those applicants 
who do not have strong credit.
D. Alternatives
    Working with the other members of the Hurricane Sandy Rebuilding 
Task Force, SBA determined that these regulatory changes are the best 
available means of achieving the Task Force's goals of instituting new 
and innovated process improvements to SBA's Disaster Loan program and 
increasing SBA's unsecured disaster loan limits.
    SBA has already made several non-regulatory changes to implement 
the Sandy Task Force's recommendation to institute new and innovated 
process improvements to the disaster loan program. For example, SBA has 
implemented a process of separate application tracks for business and 
home disaster loans, which allows SBA to process business disaster 
loans more quickly. In addition, SBA has established a new training 
module for reserve disaster loan officers based on efficiencies and 
improvements identified in an analysis of the Hurricane Sandy response 
to ensure that a trained reserve staff is in place for future 
disasters. However, in order to fully implement the recommendations of 
the Task Force, SBA must revise its regulations to allow SBA to base 
its repayment ability determination on either the applicant's cash flow 
or credit, including credit score, and to increase the unsecured 
disaster loan limits.

Executive Order 12988

    This action meets applicable standards set forth in sections 3(a) 
and 3(b)(2) of Executive Order 12988, Civil Justice Reform, to minimize 
litigation, eliminate ambiguity, and reduce burden. The action does not 
have preemptive effect. The final rule will not have retroactive effect 
and will not apply to disasters declared before April 25, 2014.

Executive Order 13132

    SBA has determined that this interim final rule will not have 
substantial direct effects on the States, on the relationship between 
the national government and the States, or the distribution of power 
and responsibilities among the various levels of government. Therefore, 
for the purposes of Executive Order 13132, SBA has determined that this 
interim final rule has no federalism implications warranting 
preparation of a federalism assessment.

Executive Order 12866 and 13563

    Executive Order 13563 reaffirms the principles of E.O. 12866 while 
calling for improvements in the nation's regulatory system to promote 
predictability, to reduce uncertainty, and to use the best, most 
innovative, and least burdensome tools for achieving regulatory ends. 
The executive order directs agencies to consider regulatory approaches 
that reduce burdens and maintain flexibility and freedom of choice for 
the public where these approaches are relevant, feasible, and 
consistent with regulatory objectives. E.O. 13563 also requires that 
regulations be based on the open exchange of information and 
perspectives among state and local officials, affected stakeholders in 
the private sector, and the public as a whole.
    In developing this rule, SBA collaborated with multiple agencies 
through its participation on Hurricane Sandy Rebuilding Task Force. The 
Task Force was led by the Secretary of Housing and Urban Development, 
and included twenty-three executive department agencies and offices. 
The Task Force worked with these Federal agency members as well as 
state and local officials to identify areas where immediate steps could 
be taken to help communities recovering from Hurricane Sandy. SBA 
continues to communicate with the other members of the Task Force via 
monthly progress reports.
    Executive Order 13563 also recognizes the importance of maintaining 
a consistent culture of retrospective review and analysis throughout 
the executive branch. SBA had identified revisions to Sec.  123.6 to 
expedite approval of disaster loans based on credit score as a part of 
its retrospective review. As stated in that report, an analysis of the 
performance of disaster loans to borrowers with strong credit indicated 
limited risk.
    Changing the current process of requiring a cash flow analysis for 
all loan applications would allow SBA more flexibility to design a loan 
approval that is in line with current private sector practices and 
reduce the processing cost for disaster loans.

Paperwork Reduction Act (44 U.S.C. Ch. 35)

    For the purpose of the Paperwork Reduction Act, 44 U.S.C. Ch. 35, 
SBA has determined that this interim final rule would not impose any 
new reporting or recordkeeping requirements.

[[Page 22862]]

Regulatory Flexibility Act (5 U.S.C. 601-612)

    The Regulatory Flexibility Act (RFA), 5 U.S.C. 601 requires 
administrative agencies to consider the effect of their actions on 
small entities, including small businesses.
    According to the RFA, when an agency issues a rule, the agency must 
prepare an analysis to determine whether the impact of the rule will 
have a significant economic impact on a substantial number of small 
entities. However, the RFA requires such analysis only where notice and 
comment rulemaking is required. Rules are exempt from the APA notice 
and comment requirements when the agency for good cause finds that 
notice and public procedure thereon is impracticable, unnecessary, or 
contrary to the public interest. SBA has determined that there is good 
cause to adopt this interim final rule without prior public 
participation; therefore, the rule is also exempt from the RFA 
requirements. SBA invites comments on this determination.

List of Subjects in 13 CFR Part 123

    Disaster assistance, Loan programs-business, Reporting and 
recordkeeping requirements, Small businesses, Terrorism.

    For reasons set forth in the preamble, SBA amends 13 CFR part 123 
as follows:

PART 123--DISASTER LOAN PROGRAM

0
1. The authority citation for part 123 continues to read as follows:

    Authority:  15 U.S.C. 632, 634(b) (6), 636(b), 636(d), 657n; 
Pub. L. 102-395, 106 Stat. 1828, 1864; Pub. L. 103-75, 107 Stat. 
739; and Pub. L. 106-50, 113 Stat. 245.


0
2. Amend Sec.  123.6 by revising the first sentence to read as follows:


Sec.  123.6  What does SBA look for when considering a disaster loan 
applicant?

    There must be reasonable assurance that you can repay your loan 
based on SBA's analysis of your credit or your personal or business 
cash flow, and you must also have satisfactory character.* * *

0
3. Amend Sec.  123.11 as follows:
0
a. Remove the introductory text and paragraph (c);
0
b. Redesignate paragraphs (a) and (b) as (c) and (d)
0
c. Add new paragraphs (a) and (b); and
0
d. Revise the second sentence of newly redesignated paragraph (c) to 
read as follows.


Sec.  123.11  Does SBA require collateral for any of its disaster 
loans?

    (a) When collateral is not required:
    (1) Economic injury disaster loans. Generally, SBA will not require 
that you pledge collateral to secure an economic injury disaster loan 
of $25,000 or less.
    (2) Physical disaster home and physical disaster business loans. 
SBA will not require that you pledge collateral to secure a physical 
disaster home or physical disaster business loan of $14,000 or less. In 
addition, under a Major Disaster, SBA generally will not require that 
you pledge collateral to secure a physical disaster home or physical 
disaster business loan of $25,000 or less.
    (3) IDAP loans. Collateral requirements for IDAP loans are set 
forth in Subpart H of this part.
    (4) Military Reservist EIDL. For the purposes of the Military 
Reservist EIDL only, as described in section 123.513, SBA will not 
generally require that you pledge collateral to secure a loan of 
$50,000 or less.
    (b) For loans larger than the amounts outlined in paragraph (a) of 
this section, you will be required to provide available collateral such 
as a lien on the damaged or replacement property, a security interest 
in personal/business property, or both.
    (c) * * * In deciding whether collateral is required, SBA will add 
up all physical disaster loans to see if they exceed the applicable 
unsecured threshold outlined in paragraph (a)(2) of this section and 
all economic injury disaster loans to see if they exceed $25,000.
* * * * *

    Dated: April 16, 2014.
Maria Contreras-Sweet,
Administrator.
[FR Doc. 2014-09183 Filed 4-24-14; 8:45 am]
BILLING CODE 8025-01-P
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