Section 108 Loan Guarantee Program: Payment of Fees To Cover Credit Subsidy Costs, 6470-6475 [2015-02262]

Agencies

• DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Federal Register Volume 80, Number 24 (Thursday, February 5, 2015)]
[Proposed Rules]
[Pages 6470-6475]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2015-02262]


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

DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Part 570

[Docket No. FR-5767-P-01]
RIN 2506-AC35


Section 108 Loan Guarantee Program: Payment of Fees To Cover 
Credit Subsidy Costs

AGENCY: Office of the Assistant Secretary for Community Planning and 
Development, HUD.

ACTION: Proposed rule.

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

SUMMARY: This proposed rule would amend HUD's Section 108 Loan 
Guarantee Program (Section 108 Program) regulations to permit HUD, in 
accordance with statutory authority, to collect fees from Section 108 
borrowers to offset the costs of Section 108 loan guarantees. HUD is 
proposing this rule to ensure that it can begin to make Section 108 
loan guarantee commitments without appropriated subsidy. The Department 
of Housing and Urban Development Appropriations Act, 2014, authorizes 
HUD to collect fees from borrowers for this program. In anticipation of 
further appropriations acts authorizing the collection of fees for 
Section 108 loan guarantees, HUD proposes to add a new section to its 
current regulations to reflect that when appropriations for credit 
subsidy costs as authorized by Congress are either not available or 
insufficient and HUD has statutory authority to collect fees, HUD will 
impose a fee on Section 108 Program borrowers and explain the basis for 
the fee imposed. The proposed new regulatory section would provide for 
HUD to set the fee by notice.
    Elsewhere in today's Federal Register, HUD is publishing the notice 
that would propose the fee to be established for the fiscal year 2015, 
subject to statutory authorization.

DATES: Comment Due Date: March 9, 2015.

ADDRESSES: Interested persons are invited to submit comments regarding 
this proposed 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 20410-0500.
    2. Electronic Submission of Comments. Interested persons may submit 
comments electronically through the Federal eRulemaking Portal at 
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 
www.regulations.gov Web site can be

[[Page 6471]]

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 appointment to review the public comments must be 
scheduled in advance 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 Relay Service at 800-877-8339. Copies of all comments submitted 
are available for inspection and downloading at www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: Paul Webster, Director, Financial 
Management Division, Office of Block Grant Assistance, Office of 
Community Planning and Development, Department of Housing and Urban 
Development, 451 7th Street SW., Room 7180, 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 Relay Service at 800-877-
8339. FAX inquiries (but not comments) may be sent to Mr. Webster at 
202-708-1798 (this is not a toll-free number).

SUPPLEMENTARY INFORMATION:

I. Background

    The Section 108 Program is the loan guarantee component of the 
Community Development Block Grant (CDBG) program and is authorized by 
section 108 (42 U.S.C. 5308) of the Housing and Community Development 
Act of 1974, as amended (HCD Act). HUD's regulations implementing the 
Section 108 Program are codified at 24 CFR part 570, subpart M 
(entitled ``Loan Guarantees''). The Section 108 Program provides States 
and 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 activities. Under section 108(a) of the HCD 
Act and authorizing language in HUD's annual appropriations, HUD enters 
into commitments to guarantee, and subsequently guarantees, promissory 
notes issued by units of general local government (or their designated 
public agencies) or States. Under section 108(r) of the HCD Act, HUD, 
acting on behalf of these borrowers, periodically 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 private 
investors in a public offering.
    HUD guarantees the timely payment of the principal of and interest 
on the trust certificates and, under the provisions of the section 108 
statute, 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 and investors are willing to purchase 
interests in the certificates because of the security provided by such 
guarantee. Proceeds of the sale, less certain underwriting and trust 
administration fees and costs, are advanced to the 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 borrowers that require financing for projects in the 
months between the periodic public offering of fixed-rate trust 
certificates, interim financing is made available pursuant to an 
agreement between HUD and an interim lender. HUD guarantees promissory 
notes that initially are issued to the interim lender and bear interest 
at rates that adjust monthly. Such notes are typically 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 convert to the fixed rates borne by the trust certificates.
    Contemporaneously with HUD's guarantee, 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 from sources pledged as security in the contract for any 
payments made on their behalf. Section 108 notes are secured by pledges 
of annual CDBG allocations, which are the local government's own 
allocations in the case of CDBG entitlement communities and the State's 
allocations in the case of local governments in non-entitlement areas 
or States that borrow on behalf of these areas. HUD is also authorized 
to require borrowers to furnish other security, such as interests in 
real property and pledges of local revenues, in addition to pledged 
CDBG funds.
    Historically, Congress has annually appropriated funds to cover the 
credit subsidy costs of the Section 108 Program. These appropriations, 
consistent with the Federal Credit Reform Act of 1990 (2 U.S.C. 661 et 
seq.), reflect the net present value of future costs to the Federal 
Government of operating the Section 108 Program. These costs, referred 
to here as credit subsidy costs, are the estimated long-term cost to 
the federal government of the loan guarantee, excluding administrative 
costs and any incidental effects on governmental receipts or outlays. 
More specifically, the cost is the net present value of expected cash 
outflows by HUD (e.g., due to default) and the expected cash inflows to 
HUD (e.g., from recovery on collateral), discounted to the point of 
disbursement of the guaranteed loan. In recent years, the budgeted 
Section 108 credit subsidy rates (i.e., credit subsidy cost expressed 
as a percentage of loan disbursements) have ranged from 2.48% in FY 
2012 to 2.56% in FY 2014.
    The President's FY 2014 Budget Request \1\ did not request an 
appropriation for the credit subsidy costs of new Section 108 
guaranteed loans but instead called for statutory authorization to 
allow HUD to collect fees to offset such costs, making the Section 108 
Program a zero credit subsidy program. To assist with the conversion to 
a fee-based financing mechanism, HUD's FY 2014 Congressional 
Justification for the Section 108 Program proposed to allow Section 108 
borrowers to include the fee in the guaranteed loan amount.\2\ 
Borrowers would also have the option to utilize existing statutory 
authority that permits the fee to be paid with CDBG funds.
---------------------------------------------------------------------------

    \1\ The President's Budget for FY 2014 can be found at: https://www.gpo.gov/fdsys/browse/collectionGPO.action?collectionCode=BUDGET.
    \2\ https://portal.hud.gov/hudportal/documents/huddoc?id=COMDEVLOANGUAR.pdf at page R-2.
---------------------------------------------------------------------------

    Both the Senate Report (S. Rep. No. 113-45) accompanying the 
Senate's FY 2014 Transportation, Housing and Urban Development and 
Related Agencies Appropriation bill and the House Report (H.R. Rep. No. 
113-136) accompanying the House's FY 2014 Transportation, Housing and 
Urban Development and Related Agencies Appropriation bill accepted 
HUD's request to convert the Section 108 Program into a fee-based 
program. The Senate bill adopted the President's proposal to eliminate 
the credit subsidy

[[Page 6472]]

entirely in FY 2014. Accordingly, the Senate Report states that the 
Senate Committee on Appropriations expects HUD to implement a fee based 
program upon enactment of the fee authority to ensure that there is no 
delay for grantees that wish to utilize the program under a new fee-
based structure.
    The Department of Housing and Urban Development Appropriations Act, 
2014 \3\ (2014 HUD Appropriations Act) authorized HUD to collect such 
fees. The 2014 HUD Appropriations Act included a credit subsidy 
appropriation designed to enable HUD to continue making loan guarantee 
commitments during the rulemaking process and prevent a gap in the 
availability of the program.
---------------------------------------------------------------------------

    \3\ See Title II of Division L of the Consolidated 
Appropriations Act, 2014 (Pub. L. 113-76, 128 Stat. 5, approved 
January 17, 2014; see 128 Stat. 604) (2014 HUD Appropriations Act).
---------------------------------------------------------------------------

    This proposed rule is consistent with the expectations expressed in 
the joint explanatory statement (160 Cong. Rec. H1193-94 (daily ed., 
January 15, 2014) (joint explanatory statement submitted by Congressman 
Rogers)), which explains that ``HUD is not expected to be ready to 
implement a new fee-based section 108 loan program upon enactment of 
this Act. Instead, prior to the collection of fees, HUD is directed to 
establish regulations articulating how a fee-based, zero-subsidy 
program shall be implemented.''
    Further, the 2014 HUD Appropriations Act authorizes HUD to impose a 
fee to eliminate the need for credit subsidy appropriations. Such 
authority is necessary because, in 1988, Congress amended the statute 
authorizing the Section 108 Program, section 108 of the HCD Act (42 
U.S.C. 5308), to add subsection (m), which limits HUD's ability to 
impose a fee or charge with respect to a Section 108 guaranteed loan. 
The 2014 HUD Appropriations Act provides HUD the discretion to collect 
a fee from Section 108 borrowers ``notwithstanding subsection (m) of 
such section 108.'' \4\
---------------------------------------------------------------------------

    \4\ 2014 HUD Appropriations Act at 128 Stat. 614.
---------------------------------------------------------------------------

II. This Proposed Rule

A. New Sec.  570.712 (Collection of Fees; Procedure To Determine Amount 
of Fee).

    This rule proposes to amend the Section 108 regulations at 24 CFR 
part 570, subpart M, to establish a new section, Sec.  570.712, 
entitled ``Collection of fees; procedure to determine amount of the 
fee,'' that would provide for the collection of fees for the Section 
108 Loan Guarantee Program. New Sec.  570.712 would provide that where 
HUD has been authorized to collect a fee for the Section 108 Program 
and Congress has not appropriated a subsidy for the Section 108 Program 
or the appropriated subsidy is insufficient to offset the costs of the 
Section 108 loan guarantees, HUD will collect a fee for the program. 
When such conditions occur, HUD will announce its intent to impose a 
fee through notice published in the Federal Register and explain the 
basis for the fee imposed.
    HUD will provide for announcement of the fee through notice in the 
Federal Register rather than codifying the fee in Sec.  570.712, as the 
fee may change from year to year. The imposition of the fee is 
dependent upon the authority provided for in annual appropriations 
acts. HUD will solicit comment on the initial proposed fee through this 
initial proposed rule and Notice, and may solicit comment on future 
Notices that impose the fee if changes to the assumptions underlying 
the fee calculation or the fee structure itself raise new 
considerations for borrowers.
    The fee to be imposed will not be expressed as a dollar amount but 
rather as percentages of the principal amount of the guaranteed loan. 
The fee will be based on a determination that such fees, when 
collected, will reduce the credit subsidy cost to a level that 
eliminates the need for appropriated subsidy budget authority. The 
required fees may include both an up-front and a periodic component, 
depending on market conditions and the credit risk to the Section 108 
program. New Sec.  570.712 would provide that each public entity or its 
designated public agency and each State issuing debt obligations would 
be responsible for the payment of all fees charged under this section.

B. Related Amendments to Existing Regulations

    In addition to establishing new Sec.  570.712, this proposed rule 
would make related amendments to other sections of part 570, subpart M.
1. Definition of ``Credit Subsidy Cost''
    The proposed rule would amend Sec.  570.701 (Definitions) to add a 
definition of ``credit subsidy cost.'' Specifically, ``credit subsidy 
cost'' would be defined as the estimated long-term cost to the Federal 
Government of a Section 108 loan guarantee or a modification thereof, 
calculated on a net present value basis, excluding administrative costs 
and any incidental effects on governmental receipts or outlays. This 
definition is the definition of ``cost'' in the Federal Credit Reform 
Act of 1990 \5\ (2 U.S.C. 661-661f at Sec.  661a), modified to exclude 
direct loans, which are not authorized under the Section 108 program.
---------------------------------------------------------------------------

    \5\ The 2014 HUD Appropriations Act references section 502 of 
the Congressional Budget Act of 1974. Section 502 was added to the 
Congressional Budget Act of 1974 by the Federal Credit Reform Act of 
1990, Public Law 101-508, title XIII, subtitle B, Sec.  13201(a), 
104 Stat. 1388-610.
---------------------------------------------------------------------------

2. Requirements for Payment of Fees and Payment Options
    Paragraph (g) of Sec.  570.705 (Loan requirements) would be amended 
to add, as a loan requirement, that each public entity or its 
designated public agency and each State issuing debt obligations must 
pay any and all fees charged by HUD for the purpose of paying the 
credit subsidy costs of the loan guarantee. In addition to including 
this requirement, the rule proposes to remove redundant language in 
Sec.  570.705(g) addressing a borrower's ability to pay issuance, 
underwriting, servicing, and other costs with guaranteed loan funds. 
This language duplicates authority granted in Sec.  570.703.
    As permitted by Sec.  570.705(c)(1)(i), borrowers will be able to 
pay the fee using CDBG funds. To further facilitate the payment of 
these charges, HUD also proposes to permit the payment of these fees 
from guaranteed loan proceeds. As such, Sec.  570.703 (Eligible 
activities) would be amended to provide that guaranteed loan funds may 
be used for the payment of fees charged by HUD, when such fees are paid 
from the disbursement of guaranteed loan funds. Additionally, to notify 
the public of plans to use grant funds or loan proceeds to pay the fee, 
HUD proposes changes to Sec.  570.704 (Application requirements) to 
require applicants to include the estimated amount of the fee to be 
paid in the application for loan guarantee assistance. Use of grant 
funds for fees or payments of principal and interest must also be 
included in each applicant's consolidated plan.
    Specific solicitation of comment: HUD acknowledges that financing 
the fees could also result in net higher costs to borrowers because the 
fee needed to achieve zero subsidy would have to account for risk of 
default and the borrower would have to pay interest on the financed 
fee. HUD specifically seeks comment on whether to require borrowers to 
pay fee amounts from other sources or allow borrowers to add upfront 
fees to the face value of the guaranteed loan by paying fees from 
guaranteed loan funds at the time of loan disbursement.

[[Page 6473]]

3. Exemption From Statutory Primary Objective
    HUD proposes to amend paragraph (a)(3)(iii) of Sec.  570.200 of 
HUD's CDBG regulations to clarify that when the fee is paid from the 
proceeds of a guaranteed loan, grant funds used to repay that loan are 
not subject to the requirement that not less than 70 percent of a 
grantee's aggregate CDBG expenditures over a specified one-, two-, or 
three-year period shall be for activities benefitting low- and 
moderate-income persons.\6\ This exclusion from the overall benefit 
calculation would be added to make clear that payment of fees is 
covered by the existing exclusion of grant funds used for repayment of 
Section 108 guaranteed loans at Sec.  570.200(a)(3)(iii). Expenditures 
of guaranteed loan funds for payment of the fee are treated as part of 
the cost of carrying out the activity financed with the guaranteed 
loan. Section 108 activities that benefit low- and moderate-income 
persons are already included in the calculation, and such activities 
should only be considered once when calculating overall benefit.
---------------------------------------------------------------------------

    \6\ See Housing and Community Development Act of 1974, as 
amended (Pub. L. 93-383, Sec.  101(c) (1974); 42 U.S.C. 5301).
---------------------------------------------------------------------------

III. Proposed 2015 Fee: 2.42% of the Principal Obligation of the Loan

    As noted in the Summary to this proposed rule, elsewhere in today's 
Federal Register, HUD proposes the initial fee to be imposed for the 
Section 108 Program.
    In determining the appropriate level of fee, HUD will consider the 
amount required to fully offset the cost to the Federal Government 
associated with making a loan guarantee. Credit subsidy cost 
calculations incorporate assumptions based on: (i) data on default 
frequency for municipal debt where such debt is comparable to loans in 
the Section 108 portfolio; (ii) data on recovery rates on collateral 
security for comparable municipal debt; (iii) the expected composition 
of the Section 108 cohort by end users of the guaranteed loan funds 
(e.g., third party borrowers and public entities); and (iv) other 
relevant information (e.g., statutory changes) that would affect the 
applicability of the default and recovery data on comparable municipal 
debt.
    Paragraph (b) of Sec.  570.712 would provide that HUD will publish 
a notice in the Federal Register with the fee structure and levels, 
taking into consideration total available commitment authority and what 
level of fees may be needed to operate the program for the covered 
period. Such notice will set forth the fee financing structure to be 
applied, the effective date, and any other necessary information 
regarding payment of the fee. HUD anticipates issuing such notices 
prior to the beginning of the fiscal year, with an effective date of 
the beginning of the fiscal year, and may provide updated notices as 
necessary. Additionally, HUD will periodically publish the estimated 
subsidy cost and fee as part of the President's Budget.

IV. Justification for Abbreviated Public Comment Period

    It is the general practice of HUD to provide a 60-day public 
comment period on all proposed rules. However, HUD is shortening its 
usual 60-day public comment period to 30 days for this proposed rule. 
As stated in this preamble, HUD anticipates that in the coming fiscal 
years appropriated funds will no longer be available for the credit 
subsidy costs of the Section 108 program or available in amounts 
sufficient to maintain the program. Imposition of a fee, as statutorily 
authorized, will maintain the continued availability of Section 108 
guaranteed loan financing. Through HUD's Congressional Justifications 
for FY 2014 and 2015, HUD has provided public notice of its proposal to 
make the Section 108 program a fee-based program.
    Section 108 is a valuable financing source for community and 
economic development projects. As stated in HUD's Congressional 
Justifications for FY 2015 and FY 2014, States and local governments 
face daunting challenges in addressing their community and economic 
development needs, and the Section 108 Loan Guarantee Program enables 
CDBG grantees to borrow up to 5 times their current CDBG allocation to 
finance economic development, public facilities and housing activities 
consistent with CDBG program requirements.
    For these reasons and those already presented in this preamble, it 
is important to implement a Section 108 fee-based program as soon as 
possible to ensure the continued availability of the Section 108 
program, and therefore HUD has determined that a 30-day public comment 
period is appropriate.

V. Findings and Certifications

Regulatory Review--Executive Order 12866

    Under Executive Order 12866 (Regulatory Planning and Review), a 
determination must be made whether a regulatory action is significant, 
and therefore, subject to review by the Office of Management and Budget 
(OMB) in accordance with the requirements of the order. This rule was 
determined to constitute a ``significant regulatory action'' as defined 
in section 3(f) of Executive Order 12866. The fee proposed to be 
imposed under this rule would only be at such level to cover the costs 
of administration of the program that would have otherwise been covered 
by appropriations.
    Consistent with Executive Order 12866, HUD prepared a regulatory 
impact analysis (RIA) for the rule. Based on recent annual program 
activity, HUD determined that the amount to cover the costs of the 
program is generally not more than $5 million in a fiscal year. 
Transfers resulting from the proposed fee to be imposed are likely to 
range from $4 million to $6 million. The clear economic benefit of the 
imposition of the proposed fee would be to continue to provide for the 
guarantee of loans that are underprovided by the private sector. HUD's 
RIA, which describes in detail the costs and benefits and impact of the 
proposed rule is available at www.regulations.gov under the docket 
number for this rule.
    The docket file 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 20410-0500. Due to security 
measures at the HUD Headquarters building, please schedule an 
appointment to review the docket file by calling the Regulations 
Division at 202-708-3055 (this is not a toll-free number). Persons with 
hearing or speech impairments may access the above telephone number via 
TTY by calling the toll-free Federal Information Relay Service at 800-
877-8339.

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 proposes to implement the statutorily authorized power 
for HUD to collect fees from borrowers to cover the credit subsidy 
costs of operating the program. As discussed in this preamble, HUD 
proposes to assist Section 108 borrowers' transition to a fee-based 
financing mechanism by allowing borrowers to include the fee in the 
guaranteed loan amount. This rule also proposes to permit borrowers to 
pay the

[[Page 6474]]

fee with pledged CDBG funds. The amount of the fee would be determined 
by the amount required to fully offset the credit subsidy cost of the 
program.
    The 2014 HUD Appropriations Act authorized HUD to charge a fee for 
the Section 108 Program. Charging a fee will become a practical 
necessity at such time when current appropriations for the program's 
credit subsidy costs are exhausted.
    This proposed rule reflects statutorily authorized actions which 
HUD determined that it must take to ensure uninterrupted operation of 
the Section 108 Loan Guarantee Program. By allowing borrowers to 
include the fee in the guaranteed loan amount or pay the fee with 
pledged CDBG funds, HUD has strived to minimize the impact that 
imposing a fee may otherwise have on the program. Accordingly, it is 
HUD's determination that this proposed rule would not have a 
significant economic 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.

Environmental Review

    In accordance with 24 CFR 50.19(c)(6), this proposed rule involves 
establishment of a rate or cost determinations and related external 
administrative requirements and procedures which do not constitute a 
development decision that affects the physical condition of specific 
project areas or building sites. Accordingly, under 24 CFR 50.19(c)(6), 
this proposed rule is categorically excluded from environmental review 
under the National Environmental Policy Act of 1969 (42 U.S.C. 4321).

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.

Catalog of Federal Domestic Assistance

    The Catalog of Federal Domestic Assistance (CFDA) 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 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.

    Accordingly, for the reasons described in the preamble, HUD 
proposes to amend 24 CFR part 570 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. 3535(d) and 5301-5320.

0
2. In Sec.  570.200, revise paragraph (a)(3)(iii) to read as follows:


Sec.  570.200  General Policies.

* * * * *
    (a) * * *
    (3) * * *
    (iii) Funds expended for the repayment of loans guaranteed under 
the provisions of subpart M (including repayment of the portion of a 
loan used to pay any issuance, servicing, underwriting, or other costs 
as may be incurred under Sec.  570.705(g)) shall also be excluded;
* * * * *
0
3. In Sec.  570.701, add in alphabetical order the definition of 
``Credit Subsidy Cost'' to read as follows:


Sec.  570.701  Definitions.

* * * * *
    Credit subsidy cost means the estimated long-term cost to the 
Government of a Section 108 loan guarantee or a modification thereof, 
calculated on a net present value basis, excluding administrative costs 
and any incidental effects on governmental receipts or outlays.
* * * * *
0
4. In Sec.  570.703, add paragraph (n) to read as follows:


Sec.  570.703  Eligible activities.

* * * * *
    (n) Payment of fees charged by HUD pursuant to Sec.  570.712.
0
5. Amend Sec.  570.704, by revising paragraphs (a)(1)(i)(D) and 
(a)(1)(v) and removing and reserving paragraph (c)(2).


Sec.  570.704  Application requirements.

    (a) * * *
    (1) * * *
    (i) * * *
    (D) A description of any CDBG funds, including guaranteed loan 
funds and grant funds, that will be used to pay fees required under 
Sec.  570.705(g). The description must include an estimate of the 
amount of CBDG funds that will be used for this purpose. If the 
applicant will use grant funds to pay required fees, it must include 
this planned use of grant funds in its consolidated plan.
* * * * *
    (v) If an application for loan guarantee assistance is to be 
submitted by an entitlement or nonentitlement public entity 
simultaneously with the public entity's submission for its grant, the 
public entity shall include and identify in its proposed and final 
consolidated plan the activities to be undertaken with the guaranteed 
loan funds, the national objective to be met by each of these 
activities, the amount of any program income expected to be received 
during the program year, and the amount of guaranteed loan funds to be 
used. The public entity shall also include in the consolidated plan a 
description of the pledge of grants, as required under Sec.  
570.705(b)(2), and the use of grant funds to pay for any fees required 
under Sec.  570.705(g). In such cases the proposed and final 
application requirements of paragraphs (a)(1)(i), (iii), and (iv) of 
this section will be deemed to have been met.
    (c) * * *
    (2) [Reserved]
* * * * *
0
6. Amend Sec.  570.705, by revising the heading of paragraph (c) and 
paragraph (g) to read as follows:


Sec.  570.705  Loan requirements.

* * * * *

[[Page 6475]]

    (c) Use of grants for loan repayment, issuance, underwriting, 
servicing, and other costs.
* * * * *
    (g) Issuance, underwriting, servicing, and other costs. (1) 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.
    (2) Each public entity or its designated public agency and each 
State issuing debt obligations under this subpart must pay any and all 
fees charged by HUD pursuant to Sec.  570.712.
* * * * *
0
7. Add Sec.  570.712 to read as follows:


Sec.  570.712  Collection of fees; procedure to determine amount of the 
fee.

    This section contains additional procedures for guarantees of debt 
obligations under section 108 when HUD is required or authorized to 
collect fees to pay the credit subsidy costs of the loan guarantee 
program.
    (a) Collection of fees. HUD may collect fees from borrowers for the 
purpose of paying the credit subsidy cost of the loan guarantee. Each 
public entity or its designated public agency and each State issuing 
debt obligations under this subpart is responsible for the payment of 
any and all fees charged pursuant to this section. Such fees are 
payable from grants allocated to the issuer pursuant to the Act or from 
other sources, but are only payable from guaranteed loan funds if the 
fee is deducted from a disbursement of guaranteed loan funds.
    (b) Amount of fee. (1) HUD shall calculate the level of the fee as 
a percentage of the principal amount of the guaranteed loan as provided 
by this section based on a determination that such fees when collected 
will reduce the credit subsidy cost to the level established by 
applicable appropriation acts. The amount of the fee payable by the 
public entity or State shall be determined by applying separately the 
percentages announced by Federal Register notice to guaranteed loan 
disbursements as they occur or periodically to outstanding principal 
balances, or both.
    (2) HUD shall publish the proposed fees required under paragraph 
(a) of this section in the Federal Register and provide a 30-day public 
comment period for the purpose of inviting comment on the proposed fee 
prior to adoption of the fee if changes to the assumptions underlying 
the fee calculation or the fee structure itself raise new 
considerations for Borrowers. After consideration of public comments, 
HUD will publish a second Federal Register notice announcing the fee to 
be applied, the effective date of the fee, and any other necessary 
information regarding payment of the fee.

    Dated: December 17, 2014.
Clifford Taffet,
General Deputy Assistant Secretary for Community Planning and 
Development.
[FR Doc. 2015-02262 Filed 2-4-15; 8:45 am]
BILLING CODE 4210-67-P