Immediate, Expedited, and Private Disaster Assistance Loan Programs, 63715-63717 [2015-26532]
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63715
Proposed Rules
Federal Register
Vol. 80, No. 203
Wednesday, October 21, 2015
This section of the FEDERAL REGISTER
contains notices to the public of the proposed
issuance of rules and regulations. The
purpose of these notices is to give interested
persons an opportunity to participate in the
rule making prior to the adoption of the final
rules.
SMALL BUSINESS ADMINISTRATION
13 CFR Part 123
RIN 3245–AF99
Immediate, Expedited, and Private
Disaster Assistance Loan Programs
U.S. Small Business
Administration.
ACTION: Advance Notice of Proposed
Rulemaking (ANPRM).
AGENCY:
The U.S. Small Business
Administration (SBA) is seeking
comments on this Advance Notice of
Proposed Rulemaking (ANPRM)
regarding the Immediate Disaster
Assistance Program (IDAP), the
Expedited Disaster Assistance Program
(EDAP), and the Private Disaster
Assistance Program (PDAP).
Specifically, SBA is seeking comments
on the development of proposed
regulations for PDAP and EDAP and
potential revisions to the existing
regulations for IDAP. These programs
were authorized by the Small Business
Disaster Response and Loan
Improvements Act of 2008. The purpose
of this ANPRM is to request feedback
from potential participants and the
public in order to implement these
programs in a way that will encourage
and enable private sector lenders to
participate with SBA to fund loans to
disaster survivors.
DATES: Comments must be submitted on
or before December 21, 2015.
ADDRESSES: You may submit comments,
identified by RIN 3245–AF99, by any of
the following methods: (1) Federal
Rulemaking Portal: https://
www.regulations.gov. Follow the
instructions for submitting comments;
or (2) Mail/Hand Delivery/Courier: U.S.
Small Business Administration, Attn:
Michelle Genovese, Office of Capital
Access, 409 Third Street SW., 8th Floor,
Washington, DC 20416. All comments
will be posted on www.regulations.gov.
If you wish to submit confidential
business information (CBI) as defined in
the User Notice at www.regulations.gov,
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SUMMARY:
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17:19 Oct 20, 2015
Jkt 238001
you must submit such information to
the U.S. Small Business Administration,
Attn: Michelle Genovese, 409 Third
Street SW., 8th Floor, Washington, DC
20416, or send an email to
michelle.genovese@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:
Michelle Genovese, U.S. Small Business
Administration, 409 3rd Street SW., 8th
Floor, Washington, DC 20416, telephone
number (202) 401–8282 or
michelle.genovese@sba.gov.
SUPPLEMENTARY INFORMATION:
I. Background
The Small Business Disaster Response
and Loan Improvements Act of 2008
created three new guaranteed disaster
loan programs: The Immediate Disaster
Assistance Program, the Expedited
Disaster Assistance Program, and the
Private Disaster Assistance Program. See
Public Law 110–246 (June 18, 2008).
Unlike SBA’s direct disaster loan
program, authorized by Section 7(b) of
the Small Business Act, under which
disaster survivors borrow loan funds
directly from SBA, the guaranteed
disaster loan programs are designed to
allow private sector lenders to
participate with SBA in the delivery of
disaster loans. The purpose of these
programs is to provide disaster
survivors with additional avenues for
disaster relief in order to help them
recover as quickly as possible following
a disaster. Details on the features and
requirements of each program are
described below.
Immediate Disaster Assistance Program
(IDAP)
The statutory provisions for IDAP
may be found in Section 12084 of the
Small Business Disaster Response and
Loan Improvements Act of 2008,
codified at 15 U.S.C. 657n. Under IDAP,
SBA guarantees 85% of a loan from
participating lenders to small businesses
that have suffered physical or economic
injury due to a disaster. IDAP loans may
be made available for any disaster
declared by SBA. The intent of the
program is to provide small businesses
with immediate access to small dollar
loans in the wake of a disaster on an
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Fmt 4702
Sfmt 4702
interim basis pending receipt of a direct
disaster loan from SBA. Applicants
must meet the basic eligibility
requirements for a direct disaster loan
from SBA and must apply for the SBA
direct disaster loan in order to qualify
for the IDAP loan. The IDAP loan has
a maximum amount of $25,000. SBA
does not charge any fees on an IDAP
loan. If a direct disaster loan is later
approved, proceeds from that loan must
be applied first to repay the IDAP loan.
However, if the direct disaster loan is
declined, or if the direct disaster loan
covers only a portion of the IDAP loan,
the balance of the IDAP loan must have
a minimum term of 120 months from
the date of final disbursement of the
IDAP loan. By regulation, IDAP lenders
must be lenders that participate in the
guaranteed loan program authorized by
Section 7(a) of the Small Business Act.
Additionally, by regulation, IDAP is a
delegated authority loan program; nondelegated processing is not available.
On October 1, 2010, SBA issued an
interim final rule (75 FR 60588) that
provided regulatory requirements for
the program. These regulations include
details on borrower eligibility
requirements, loan terms, fees, and
requirements for participating lenders.
See 13 CFR 123.700–123.706. SBA did
not receive any comments on the
interim final rule. On October 25, 2010,
SBA issued a Notice in the Federal
Register (75 FR 65534) setting the
interest rate on IDAP loans at the prime
rate plus one percentage point. Pursuant
to 13 CFR 123.703, this rate may be
changed by publication in the Federal
Register from time to time.
Expedited Disaster Assistance Program
(EDAP)
The statutory provisions for EDAP
may be found in Section 12085 of the
Small Business Disaster Response and
Loan Improvements Act of 2008. Under
EDAP, SBA would guarantee short term
loans from participating lenders to small
businesses that have suffered damage
due to a ‘‘catastrophic’’ disaster. Section
7(b)(9) of the Small Business Act
provides that if the President declares a
major disaster, the SBA Administrator
may declare eligibility for additional
disaster assistance if the disaster has
resulted in extraordinary levels of
casualties or damage or disruption
severely affecting the population,
infrastructure, environment, economy,
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63716
Federal Register / Vol. 80, No. 203 / Wednesday, October 21, 2015 / Proposed Rules
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national morale, or government
functions in an area. In order for the
SBA Administrator to declare as a
catastrophic disaster with eligibility for
additional disaster assistance, the
disaster must be of such size and scope
that SBA’s direct disaster loan program
is incapable of providing adequate and
timely assistance, or a significant
number of businesses outside of the
disaster area have suffered substantial
economic injury as a result of the
disaster.
The maximum amount of an EDAP
loan would be $150,000 and SBA would
not charge any fees on the loans. The
term of an EDAP loan must be limited
to 180 days, with extensions on a caseby-case basis. The EDAP loan may be
refinanced by a direct disaster loan from
SBA or other sources. The maximum
interest rate must not exceed 300 basis
points over the federal funds rate.
Private Disaster Assistance Program
(PDAP)
The statutory provisions for PDAP
may be found in Section 12083 of the
Small Business Disaster Response and
Loan Improvements Act of 2008,
codified at 15 U.S.C. 636(c). Under
PDAP, SBA is authorized to guarantee
not more than 85 percent of a loan from
participating lenders to small
businesses, homeowners or renters that
have suffered damage due to a
‘‘catastrophic’’ disaster, as defined
above.
Those eligible for PDAP include
homeowners, renters, or small
businesses that have suffered physical
losses and small businesses that have
suffered economic injury as a result of
a catastrophic disaster. As required by
the statute, any SBA lender
participating in the Preferred Lenders
Program (PLP) under Section 7(a) of the
Small Business Act would be eligible to
participate in the PDAP program, and
SBA would establish criteria for
additional PDAP lenders in regulations.
All PDAP lenders would be eligible to
make PDAP loans to small businesses,
but only PLP lenders would be eligible
to make PDAP loans to homeowners or
renters.
The maximum amount of a PDAP
loan is $2,000,000. SBA would not
charge any fees on the loans. Terms and
conditions of PDAP loans would be the
same as SBA direct disaster loans.
II. Comments Requested
These guaranteed disaster loan
programs would provide disaster
survivors with additional avenues for
disaster relief and give 7(a) participating
lenders an opportunity to partner with
SBA to assist in the recovery of
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Jkt 238001
homeowners and small businesses in
their communities after a disaster. SBA
requests comments from the public on
features necessary to attract lender
participation while providing timely
and affordable assistance to disaster
survivors. Responders are invited to
comment on any or all portions of this
ANPRM, and may submit additional
comments on issues relevant to IDAP,
EDAP and PDAP not specifically
covered.
General questions applicable to all
three programs include, but are not
limited to the following:
1. Interest rate and fees. SBA
understands that disaster loans are
inherently riskier loans and that lenders
use interest rates and fees in order to
offset risk. In developing specific
program requirements for IDAP, SBA
attempted to strike a balance between
allowing lenders to mitigate risk and
keeping disaster recovery loans
affordable. This included capping
borrower application fees at $250, a late
payment fee not to exceed 5 percent of
the scheduled payment, and limiting the
interest rate to the prime rate plus one
percentage point. Since then, SBA has
received feedback from lenders that the
interest rate and fee limitations are too
low. Given the general description of
each program, what interest rates and
fees would be needed to support lender
participation in these programs?
2. Borrower eligibility. For all three
guaranteed disaster loan programs,
borrowers must meet the same
eligibility requirements as borrowers in
SBA’s direct disaster loan program.
These requirements are generally
contained in the following regulations
in Title 13 of the Code of Federal
Regulations: For individuals, §§ 123.100
and 123.101; for businesses with
physical damage, §§ 123.200 and
123.201; and for businesses with
economic injury, §§ 123.300 and
123.301. For IDAP, the eligibility
requirements are set forth in 13 CFR
123.702.
Only borrowers who sustained
physical or economic damages and who
are located in an eligible disaster area
would be eligible for loans under the
guaranteed disaster loan programs.
Before making a direct disaster loan for
physical damage, SBA performs an onsite verification of the losses resulting
from the declared disaster in order to
determine the eligible loan amount. For
both economic injury and physical
damage loans, SBA must also verify the
location of the borrower. How would a
loss verification process affect lender
costs? SBA seeks input from potential
lenders regarding their ability to make
loans in accordance with these
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requirements. For example, should SBA
allow lenders to rely on borrowers’ selfcertifications when determining
eligibility? Comments may address,
among other things, verification of
borrower eligibility, borrower rights of
appeal, liability for false statements by
borrowers, and the level of training/
instruction required to participate in the
programs.
3. Duplication of benefits. By statute,
SBA direct disaster loans are only
available for physical damages or
economic injury that is not
compensated by other sources in order
to avoid a duplication of benefits. If
there are no other recoveries, a disaster
loan borrower is generally eligible to
borrow up to the amount of their
disaster losses, as long as the amount is
within statutory or regulatory limits and
the borrower has repayment ability. If
the borrower has received any funds
from other sources for the same losses,
however, the amount of the disaster
loan must be reduced. All three
guaranteed disaster loan programs must
adhere to this same requirement. Other
sources include proceeds from
insurance or other indemnifications,
grants or other reimbursement
(including loans) from government
agencies or private organizations, gifts,
condemnation awards, and salvage
(including any sale or re-use) of items of
disaster-damaged property. What
concerns, if any, do lenders have
regarding their ability to evaluate
borrower eligibility in accordance with
this requirement?
4. Catastrophic disasters. PDAP and
EDAP are only available in
‘‘catastrophic’’ disasters (as discussed
above); IDAP is available in any SBAdeclared disaster that SBA designates as
IDAP-eligible. Would lenders be
interested in making guaranteed PDAP
and EDAP loans for disasters other than
‘‘catastrophic’’ disasters? PDAP loans
are intended to be long-term guaranteed
disaster loans. Are lenders prepared to
underwrite these types of loans
following a catastrophic disaster, when
resources and access to the disaster site
may be limited? Would a catastrophic
disaster affect the ability of lenders to
deliver PDAP and EDAP loans in a
timely manner?
5. Timing. Disasters are, by definition,
sudden events that cause severe damage
in the affected areas. How quickly
would participating lenders be able to
make IDAP, EDAP and PDAP loans
available to disaster survivors after SBA
identifies a disaster as eligible for the
IDAP program or the SBA Administrator
declares eligibility for additional
disaster assistance due to a catastrophic
disaster?
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Federal Register / Vol. 80, No. 203 / Wednesday, October 21, 2015 / Proposed Rules
6. Conflict of interest. SBA recognizes
that lenders that participate in any of
the three guaranteed disaster loan
programs may be more likely to use the
program(s) to lend to their existing
depositors and borrowers. This could be
the result of the lender’s greater
familiarity and experience with the
depositor or borrower, which would be
particularly useful if business or
personal records have been destroyed in
the disaster. SBA 7(a) lenders and IDAP
lenders are subject to the requirements
of 13 CFR 120.140 (What ethical
requirements apply to participants?).
SBA invites comments on whether there
are any additional relationships or
transactions that should be restricted in
the guaranteed disaster loan programs
due to the potential for a conflict of
interest on the part of the lender that
might put the SBA-guaranteed disaster
loan at greater risk than would
otherwise be the case.
IDAP Specific Issues
7. Term of loan. IDAP loans are
designed to be interim loans that will be
repaid with the proceeds of a direct
disaster loan from SBA. If SBA does not
approve an IDAP borrower for a direct
disaster loan in the amount of the IDAP
loan, the remaining balance of the IDAP
loan, by statute, must have a term of at
least ten years from the date of final
disbursement. Lenders have indicated
concern that a ten year repayment
period is too long. What is the
appropriate repayment term for an IDAP
loan if a direct disaster loan sufficient
to repay the IDAP loan is not approved
by SBA?
8. Servicing and Liquidation. Unlike
servicing and liquidation for regular 7(a)
loans, SBA regulations require an IDAP
lender to service and liquidate IDAP
loans in accordance with the existing
practices and procedures that the IDAP
lender uses for its non-SBA guaranteed
commercial loans. See 13 CFR
123.706(d) and (e). What concerns, if
any, do lenders have regarding these
requirements?
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EDAP Specific Issues
9. Guaranty percentage. Unlike for
IDAP and PDAP, the statute did not set
a guaranty percentage for EDAP. What
guaranty percentage would lenders
require in order to make EDAP loans?
10. Refinancing option. Even though
the term of an EDAP loan is limited to
180 days (with extensions on a case-bycase basis), the statute gives SBA the
authority to refinance EDAP loans with
the proceeds of direct disaster loans.
Would a refinancing option make EDAP
a more attractive loan product?
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11. Use of proceeds. The statute
requires SBA to specify whether EDAP
proceeds may be used for the following
purposes: Paying employees; paying
bills and other financial obligations;
making repairs; purchasing inventory;
restarting or operating a small business
concern in the community in which it
was conducting operations prior to the
applicable major disaster, or to a
neighboring area, county, or parish in
the disaster area; or covering additional
costs until the small business concern is
able to obtain funding through
insurance claims, Federal assistance
programs, or other sources. SBA seeks
input on which uses of proceeds,
included those listed above or others
recommended by commenters, would be
appropriate for EDAP loans.
PDAP Specific Issues
12. Term of loan. The term of an SBA
direct disaster loan is determined based
on the borrower’s ability to repay. The
maximum term is 30 years, and the
average loan term is 18.5 years. PDAP
loans may have maturities of up to 30
years. Would lenders be willing to make
a PDAP loan of up to 30 years? If not,
what is the maximum loan term that
lenders would consider suitable in the
PDAP program.
13. Amount of loan. The amount of
direct disaster loans to homeowners and
renters are capped by regulation.
Generally, the regulations allow up to
$40,000 for personal property, $200,000
for repair or replacement of a primary
residence, and $200,000 for refinancing.
See 13 CFR 123.105. Are lenders willing
to make guaranteed disaster loans to
homeowners and renters in these
amounts? If not, what is the range of
loan amounts that lenders would prefer?
14. Collateral. SBA does not require
collateral for direct disaster loans made
in response to major disasters if the loan
is $25,000 or less. See 13 CFR 123.11.
Are lenders willing to make guaranteed
disaster loans of up to $25,000 with no
collateral? Additionally, SBA permits
liens on direct disaster loans to be in a
subordinate position. Are lenders
willing to make guaranteed disaster
loans if the loan will be secured by a
lien in a subordinate position?
15. Consumer lending. Only PLP
lenders are eligible to make PDAP loans
to homeowners and renters. PLP lenders
are authorized by SBA to make
commercial loans, and are not screened
in any way for capacity to make and
service loans to individuals for
residential mortgages or improvements.
Do PLP lenders have the expertise to
make non-commercial guaranteed
disaster loans, or should they be made
by other lender units organized to make
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63717
consumer loans? What training would
be required for a PLP or other lender,
and what are the concerns about the
costs associated with developing the
requisite skills? In addition, guaranteed
loans to homeowners and renters may
require compliance with consumer
lending requirements. Do lenders have
any concerns about the costs associated
with compliance with such
requirements? Should SBA’s guarantee
be conditioned upon a lender’s
compliance with these consumer
lending requirements?
16. Delegated authority lending. PLP
lenders are authorized to make PDAP
loans to homeowners and renters, as
well as small businesses. Will PLP
lenders want all PDAP loans to be made
under delegated authority? Other
lenders are authorized to make loans to
small businesses. Do other lenders want
PDAP loans to small businesses to be
made under delegated authority? If SBA
determines that a PLP lender
participating in PDAP knowingly fails to
comply with the underwriting standards
for PDAP loans, the statute requires SBA
to exclude the PLP lender from
participating in PDAP or exclude the
PLP lender from the 7(a) PLP program
for up to five years. Are PLP lenders less
likely to participate in PDAP given these
compliance requirements?
17. Sale of the Guarantee. SBA
permits the sale of the guarantee on
loans made in its other business loan
programs. Would the sale of guarantees
be a key factor in determining lender
participation in PDAP?
Maria Contreras-Sweet,
Administrator.
[FR Doc. 2015–26532 Filed 10–20–15; 8:45 am]
BILLING CODE P
SOCIAL SECURITY ADMINISTRATION
20 CFR Parts 404 and 416
[Docket No. SSA–2013–0061]
RIN 0960–AH64
Returning Evidence at the Appeals
Council Level
Social Security Administration.
Notice of proposed rulemaking
(NPRM).
AGENCY:
ACTION:
We propose to amend our
regulations by revising our rules
regarding the return of evidence at the
Appeals Council (AC) level. Our current
rules state that the AC will return to the
claimant additional evidence it receives
when the AC finds the evidence does
not relate to the period on or before the
SUMMARY:
E:\FR\FM\21OCP1.SGM
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Agencies
[Federal Register Volume 80, Number 203 (Wednesday, October 21, 2015)]
[Proposed Rules]
[Pages 63715-63717]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-26532]
========================================================================
Proposed Rules
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains notices to the public of
the proposed issuance of rules and regulations. The purpose of these
notices is to give interested persons an opportunity to participate in
the rule making prior to the adoption of the final rules.
========================================================================
Federal Register / Vol. 80, No. 203 / Wednesday, October 21, 2015 /
Proposed Rules
[[Page 63715]]
SMALL BUSINESS ADMINISTRATION
13 CFR Part 123
RIN 3245-AF99
Immediate, Expedited, and Private Disaster Assistance Loan
Programs
AGENCY: U.S. Small Business Administration.
ACTION: Advance Notice of Proposed Rulemaking (ANPRM).
-----------------------------------------------------------------------
SUMMARY: The U.S. Small Business Administration (SBA) is seeking
comments on this Advance Notice of Proposed Rulemaking (ANPRM)
regarding the Immediate Disaster Assistance Program (IDAP), the
Expedited Disaster Assistance Program (EDAP), and the Private Disaster
Assistance Program (PDAP). Specifically, SBA is seeking comments on the
development of proposed regulations for PDAP and EDAP and potential
revisions to the existing regulations for IDAP. These programs were
authorized by the Small Business Disaster Response and Loan
Improvements Act of 2008. The purpose of this ANPRM is to request
feedback from potential participants and the public in order to
implement these programs in a way that will encourage and enable
private sector lenders to participate with SBA to fund loans to
disaster survivors.
DATES: Comments must be submitted on or before December 21, 2015.
ADDRESSES: You may submit comments, identified by RIN 3245-AF99, by any
of the following methods: (1) Federal Rulemaking Portal: https://www.regulations.gov. Follow the instructions for submitting comments;
or (2) Mail/Hand Delivery/Courier: U.S. Small Business Administration,
Attn: Michelle Genovese, Office of Capital Access, 409 Third Street
SW., 8th Floor, Washington, DC 20416. All comments will be posted 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 the U.S. Small Business
Administration, Attn: Michelle Genovese, 409 Third Street SW., 8th
Floor, Washington, DC 20416, or send an email to
michelle.genovese@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: Michelle Genovese, U.S. Small Business
Administration, 409 3rd Street SW., 8th Floor, Washington, DC 20416,
telephone number (202) 401-8282 or michelle.genovese@sba.gov.
SUPPLEMENTARY INFORMATION:
I. Background
The Small Business Disaster Response and Loan Improvements Act of
2008 created three new guaranteed disaster loan programs: The Immediate
Disaster Assistance Program, the Expedited Disaster Assistance Program,
and the Private Disaster Assistance Program. See Public Law 110-246
(June 18, 2008). Unlike SBA's direct disaster loan program, authorized
by Section 7(b) of the Small Business Act, under which disaster
survivors borrow loan funds directly from SBA, the guaranteed disaster
loan programs are designed to allow private sector lenders to
participate with SBA in the delivery of disaster loans. The purpose of
these programs is to provide disaster survivors with additional avenues
for disaster relief in order to help them recover as quickly as
possible following a disaster. Details on the features and requirements
of each program are described below.
Immediate Disaster Assistance Program (IDAP)
The statutory provisions for IDAP may be found in Section 12084 of
the Small Business Disaster Response and Loan Improvements Act of 2008,
codified at 15 U.S.C. 657n. Under IDAP, SBA guarantees 85% of a loan
from participating lenders to small businesses that have suffered
physical or economic injury due to a disaster. IDAP loans may be made
available for any disaster declared by SBA. The intent of the program
is to provide small businesses with immediate access to small dollar
loans in the wake of a disaster on an interim basis pending receipt of
a direct disaster loan from SBA. Applicants must meet the basic
eligibility requirements for a direct disaster loan from SBA and must
apply for the SBA direct disaster loan in order to qualify for the IDAP
loan. The IDAP loan has a maximum amount of $25,000. SBA does not
charge any fees on an IDAP loan. If a direct disaster loan is later
approved, proceeds from that loan must be applied first to repay the
IDAP loan. However, if the direct disaster loan is declined, or if the
direct disaster loan covers only a portion of the IDAP loan, the
balance of the IDAP loan must have a minimum term of 120 months from
the date of final disbursement of the IDAP loan. By regulation, IDAP
lenders must be lenders that participate in the guaranteed loan program
authorized by Section 7(a) of the Small Business Act. Additionally, by
regulation, IDAP is a delegated authority loan program; non-delegated
processing is not available.
On October 1, 2010, SBA issued an interim final rule (75 FR 60588)
that provided regulatory requirements for the program. These
regulations include details on borrower eligibility requirements, loan
terms, fees, and requirements for participating lenders. See 13 CFR
123.700-123.706. SBA did not receive any comments on the interim final
rule. On October 25, 2010, SBA issued a Notice in the Federal Register
(75 FR 65534) setting the interest rate on IDAP loans at the prime rate
plus one percentage point. Pursuant to 13 CFR 123.703, this rate may be
changed by publication in the Federal Register from time to time.
Expedited Disaster Assistance Program (EDAP)
The statutory provisions for EDAP may be found in Section 12085 of
the Small Business Disaster Response and Loan Improvements Act of 2008.
Under EDAP, SBA would guarantee short term loans from participating
lenders to small businesses that have suffered damage due to a
``catastrophic'' disaster. Section 7(b)(9) of the Small Business Act
provides that if the President declares a major disaster, the SBA
Administrator may declare eligibility for additional disaster
assistance if the disaster has resulted in extraordinary levels of
casualties or damage or disruption severely affecting the population,
infrastructure, environment, economy,
[[Page 63716]]
national morale, or government functions in an area. In order for the
SBA Administrator to declare as a catastrophic disaster with
eligibility for additional disaster assistance, the disaster must be of
such size and scope that SBA's direct disaster loan program is
incapable of providing adequate and timely assistance, or a significant
number of businesses outside of the disaster area have suffered
substantial economic injury as a result of the disaster.
The maximum amount of an EDAP loan would be $150,000 and SBA would
not charge any fees on the loans. The term of an EDAP loan must be
limited to 180 days, with extensions on a case-by-case basis. The EDAP
loan may be refinanced by a direct disaster loan from SBA or other
sources. The maximum interest rate must not exceed 300 basis points
over the federal funds rate.
Private Disaster Assistance Program (PDAP)
The statutory provisions for PDAP may be found in Section 12083 of
the Small Business Disaster Response and Loan Improvements Act of 2008,
codified at 15 U.S.C. 636(c). Under PDAP, SBA is authorized to
guarantee not more than 85 percent of a loan from participating lenders
to small businesses, homeowners or renters that have suffered damage
due to a ``catastrophic'' disaster, as defined above.
Those eligible for PDAP include homeowners, renters, or small
businesses that have suffered physical losses and small businesses that
have suffered economic injury as a result of a catastrophic disaster.
As required by the statute, any SBA lender participating in the
Preferred Lenders Program (PLP) under Section 7(a) of the Small
Business Act would be eligible to participate in the PDAP program, and
SBA would establish criteria for additional PDAP lenders in
regulations. All PDAP lenders would be eligible to make PDAP loans to
small businesses, but only PLP lenders would be eligible to make PDAP
loans to homeowners or renters.
The maximum amount of a PDAP loan is $2,000,000. SBA would not
charge any fees on the loans. Terms and conditions of PDAP loans would
be the same as SBA direct disaster loans.
II. Comments Requested
These guaranteed disaster loan programs would provide disaster
survivors with additional avenues for disaster relief and give 7(a)
participating lenders an opportunity to partner with SBA to assist in
the recovery of homeowners and small businesses in their communities
after a disaster. SBA requests comments from the public on features
necessary to attract lender participation while providing timely and
affordable assistance to disaster survivors. Responders are invited to
comment on any or all portions of this ANPRM, and may submit additional
comments on issues relevant to IDAP, EDAP and PDAP not specifically
covered.
General questions applicable to all three programs include, but are
not limited to the following:
1. Interest rate and fees. SBA understands that disaster loans are
inherently riskier loans and that lenders use interest rates and fees
in order to offset risk. In developing specific program requirements
for IDAP, SBA attempted to strike a balance between allowing lenders to
mitigate risk and keeping disaster recovery loans affordable. This
included capping borrower application fees at $250, a late payment fee
not to exceed 5 percent of the scheduled payment, and limiting the
interest rate to the prime rate plus one percentage point. Since then,
SBA has received feedback from lenders that the interest rate and fee
limitations are too low. Given the general description of each program,
what interest rates and fees would be needed to support lender
participation in these programs?
2. Borrower eligibility. For all three guaranteed disaster loan
programs, borrowers must meet the same eligibility requirements as
borrowers in SBA's direct disaster loan program. These requirements are
generally contained in the following regulations in Title 13 of the
Code of Federal Regulations: For individuals, Sec. Sec. 123.100 and
123.101; for businesses with physical damage, Sec. Sec. 123.200 and
123.201; and for businesses with economic injury, Sec. Sec. 123.300
and 123.301. For IDAP, the eligibility requirements are set forth in 13
CFR 123.702.
Only borrowers who sustained physical or economic damages and who
are located in an eligible disaster area would be eligible for loans
under the guaranteed disaster loan programs. Before making a direct
disaster loan for physical damage, SBA performs an on-site verification
of the losses resulting from the declared disaster in order to
determine the eligible loan amount. For both economic injury and
physical damage loans, SBA must also verify the location of the
borrower. How would a loss verification process affect lender costs?
SBA seeks input from potential lenders regarding their ability to make
loans in accordance with these requirements. For example, should SBA
allow lenders to rely on borrowers' self-certifications when
determining eligibility? Comments may address, among other things,
verification of borrower eligibility, borrower rights of appeal,
liability for false statements by borrowers, and the level of training/
instruction required to participate in the programs.
3. Duplication of benefits. By statute, SBA direct disaster loans
are only available for physical damages or economic injury that is not
compensated by other sources in order to avoid a duplication of
benefits. If there are no other recoveries, a disaster loan borrower is
generally eligible to borrow up to the amount of their disaster losses,
as long as the amount is within statutory or regulatory limits and the
borrower has repayment ability. If the borrower has received any funds
from other sources for the same losses, however, the amount of the
disaster loan must be reduced. All three guaranteed disaster loan
programs must adhere to this same requirement. Other sources include
proceeds from insurance or other indemnifications, grants or other
reimbursement (including loans) from government agencies or private
organizations, gifts, condemnation awards, and salvage (including any
sale or re-use) of items of disaster-damaged property. What concerns,
if any, do lenders have regarding their ability to evaluate borrower
eligibility in accordance with this requirement?
4. Catastrophic disasters. PDAP and EDAP are only available in
``catastrophic'' disasters (as discussed above); IDAP is available in
any SBA-declared disaster that SBA designates as IDAP-eligible. Would
lenders be interested in making guaranteed PDAP and EDAP loans for
disasters other than ``catastrophic'' disasters? PDAP loans are
intended to be long-term guaranteed disaster loans. Are lenders
prepared to underwrite these types of loans following a catastrophic
disaster, when resources and access to the disaster site may be
limited? Would a catastrophic disaster affect the ability of lenders to
deliver PDAP and EDAP loans in a timely manner?
5. Timing. Disasters are, by definition, sudden events that cause
severe damage in the affected areas. How quickly would participating
lenders be able to make IDAP, EDAP and PDAP loans available to disaster
survivors after SBA identifies a disaster as eligible for the IDAP
program or the SBA Administrator declares eligibility for additional
disaster assistance due to a catastrophic disaster?
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6. Conflict of interest. SBA recognizes that lenders that
participate in any of the three guaranteed disaster loan programs may
be more likely to use the program(s) to lend to their existing
depositors and borrowers. This could be the result of the lender's
greater familiarity and experience with the depositor or borrower,
which would be particularly useful if business or personal records have
been destroyed in the disaster. SBA 7(a) lenders and IDAP lenders are
subject to the requirements of 13 CFR 120.140 (What ethical
requirements apply to participants?). SBA invites comments on whether
there are any additional relationships or transactions that should be
restricted in the guaranteed disaster loan programs due to the
potential for a conflict of interest on the part of the lender that
might put the SBA-guaranteed disaster loan at greater risk than would
otherwise be the case.
IDAP Specific Issues
7. Term of loan. IDAP loans are designed to be interim loans that
will be repaid with the proceeds of a direct disaster loan from SBA. If
SBA does not approve an IDAP borrower for a direct disaster loan in the
amount of the IDAP loan, the remaining balance of the IDAP loan, by
statute, must have a term of at least ten years from the date of final
disbursement. Lenders have indicated concern that a ten year repayment
period is too long. What is the appropriate repayment term for an IDAP
loan if a direct disaster loan sufficient to repay the IDAP loan is not
approved by SBA?
8. Servicing and Liquidation. Unlike servicing and liquidation for
regular 7(a) loans, SBA regulations require an IDAP lender to service
and liquidate IDAP loans in accordance with the existing practices and
procedures that the IDAP lender uses for its non-SBA guaranteed
commercial loans. See 13 CFR 123.706(d) and (e). What concerns, if any,
do lenders have regarding these requirements?
EDAP Specific Issues
9. Guaranty percentage. Unlike for IDAP and PDAP, the statute did
not set a guaranty percentage for EDAP. What guaranty percentage would
lenders require in order to make EDAP loans?
10. Refinancing option. Even though the term of an EDAP loan is
limited to 180 days (with extensions on a case-by-case basis), the
statute gives SBA the authority to refinance EDAP loans with the
proceeds of direct disaster loans. Would a refinancing option make EDAP
a more attractive loan product?
11. Use of proceeds. The statute requires SBA to specify whether
EDAP proceeds may be used for the following purposes: Paying employees;
paying bills and other financial obligations; making repairs;
purchasing inventory; restarting or operating a small business concern
in the community in which it was conducting operations prior to the
applicable major disaster, or to a neighboring area, county, or parish
in the disaster area; or covering additional costs until the small
business concern is able to obtain funding through insurance claims,
Federal assistance programs, or other sources. SBA seeks input on which
uses of proceeds, included those listed above or others recommended by
commenters, would be appropriate for EDAP loans.
PDAP Specific Issues
12. Term of loan. The term of an SBA direct disaster loan is
determined based on the borrower's ability to repay. The maximum term
is 30 years, and the average loan term is 18.5 years. PDAP loans may
have maturities of up to 30 years. Would lenders be willing to make a
PDAP loan of up to 30 years? If not, what is the maximum loan term that
lenders would consider suitable in the PDAP program.
13. Amount of loan. The amount of direct disaster loans to
homeowners and renters are capped by regulation. Generally, the
regulations allow up to $40,000 for personal property, $200,000 for
repair or replacement of a primary residence, and $200,000 for
refinancing. See 13 CFR 123.105. Are lenders willing to make guaranteed
disaster loans to homeowners and renters in these amounts? If not, what
is the range of loan amounts that lenders would prefer?
14. Collateral. SBA does not require collateral for direct disaster
loans made in response to major disasters if the loan is $25,000 or
less. See 13 CFR 123.11. Are lenders willing to make guaranteed
disaster loans of up to $25,000 with no collateral? Additionally, SBA
permits liens on direct disaster loans to be in a subordinate position.
Are lenders willing to make guaranteed disaster loans if the loan will
be secured by a lien in a subordinate position?
15. Consumer lending. Only PLP lenders are eligible to make PDAP
loans to homeowners and renters. PLP lenders are authorized by SBA to
make commercial loans, and are not screened in any way for capacity to
make and service loans to individuals for residential mortgages or
improvements. Do PLP lenders have the expertise to make non-commercial
guaranteed disaster loans, or should they be made by other lender units
organized to make consumer loans? What training would be required for a
PLP or other lender, and what are the concerns about the costs
associated with developing the requisite skills? In addition,
guaranteed loans to homeowners and renters may require compliance with
consumer lending requirements. Do lenders have any concerns about the
costs associated with compliance with such requirements? Should SBA's
guarantee be conditioned upon a lender's compliance with these consumer
lending requirements?
16. Delegated authority lending. PLP lenders are authorized to make
PDAP loans to homeowners and renters, as well as small businesses. Will
PLP lenders want all PDAP loans to be made under delegated authority?
Other lenders are authorized to make loans to small businesses. Do
other lenders want PDAP loans to small businesses to be made under
delegated authority? If SBA determines that a PLP lender participating
in PDAP knowingly fails to comply with the underwriting standards for
PDAP loans, the statute requires SBA to exclude the PLP lender from
participating in PDAP or exclude the PLP lender from the 7(a) PLP
program for up to five years. Are PLP lenders less likely to
participate in PDAP given these compliance requirements?
17. Sale of the Guarantee. SBA permits the sale of the guarantee on
loans made in its other business loan programs. Would the sale of
guarantees be a key factor in determining lender participation in PDAP?
Maria Contreras-Sweet,
Administrator.
[FR Doc. 2015-26532 Filed 10-20-15; 8:45 am]
BILLING CODE P