Section 108 Loan Guarantee Program: Announcement of Fee To Cover Credit Subsidy Costs, 67634-67635 [2015-28002]

Download as PDF 67634 Federal Register / Vol. 80, No. 212 / Tuesday, November 3, 2015 / Rules and Regulations 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. The fees are payable from the grant allocated to the issuer pursuant to the Act (including program income derived therefrom) or from other sources, but are only payable from guaranteed loan funds if the fee is deducted from the disbursement of guaranteed loan funds. (b) Amount and determination of fee. (1) HUD shall calculate the amount of the fee as a percentage of the principal amount of the guaranteed loan as provided by this section, based on a determination that the fees when collected will reduce the credit subsidy cost to the amount established by applicable appropriation acts. The amount of the fee payable by the public entity or State shall be based on the date of the loan guarantee commitment and shall be determined by applying 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 in the Federal Register the fees required under paragraph (a) of this section, announcing the fee to be applied, the effective date of the fee, and any other necessary information regarding payment of the fee and, if necessary, provide a 30-day public comment period for the purpose of inviting comment on the proposed fee before adopting changes to the assumptions underlying the fee calculation or if the fee structure itself raises new considerations for Borrowers. HUD will publish a second Federal Register notice, if necessary, after consideration of public comments. Dated: October 26, 2015. Harriet Tregoning, Principal Deputy Assistant, Secretary for Community Planning and Development. Approved: October 19, 2015. Nani A. Coloretti, Deputy Secretary. mstockstill on DSK4VPTVN1PROD with RULES [FR Doc. 2015–28004 Filed 11–2–15; 8:45 am] BILLING CODE 4210–67–P VerDate Sep<11>2014 16:38 Nov 02, 2015 Jkt 238001 DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT 24 CFR Part 570 [Docket No. FR–5767–N–04] RIN 2506–AC35 Section 108 Loan Guarantee Program: Announcement of Fee To Cover Credit Subsidy Costs Office of the Assistant Secretary for Community Planning and Development, HUD. ACTION: Announcement of fee. AGENCY: This document announces the fee that HUD will collect from borrowers of loans guaranteed under the HUD’s Section 108 Loan Guarantee Program (Section 108 Program) to offset the credit subsidy costs of the guaranteed loans pursuant to commitments awarded in FY 2016, as authorized by the Continuing Appropriations Act, 2016. Elsewhere in today’s Federal Register, HUD is publishing a final rule that amends its regulations to permit HUD to collect fees for Section 108 guaranteed loans. DATES: Effective Date: December 3, 2015. 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 tollfree number). Individuals with speech or hearing impairments may access this number through TTY by calling the tollfree 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: SUMMARY: I. Background Elsewhere in today’s Federal Register, HUD is publishing a final rule that amends the Section 108 Program regulations to establish additional procedures when HUD is required or authorized to collect fees from Section 108 borrowers to offset the costs of the Section 108 loan guarantee commitments. Following consideration of the public comments submitted in response to HUD’s February 5, 2015 (80 FR 6469) notice that proposed the fee required to offset the credit subsidy costs to the Federal government to guarantee Section 108 loans, HUD has determined to set the fee for Section 108 loan disbursements under loan guarantee commitments awarded in FY PO 00000 Frm 00014 Fmt 4700 Sfmt 4700 2016 at 2.58 percent of the principal amount of the loan. As discussed below, and as HUD discusses in its final rule published elsewhere in today’s Federal Register, HUD determined to not to impose a fee with respect to FY 2015 loan guarantee commitments. The public is directed to HUD’s final rule for a detailed discussion by HUD of the significant issues raised by the public comments submitted in response to HUD’s February 5, 2015, notice and HUD’s response to those comments. II. FY 2016 Fee: 2.58 Percent of the Principal Amount of the Loan This document sets the fee for Section 108 loan disbursements under loan guarantee commitments awarded in FY 2016 at 2.58 percent of the principal amount of the loan. HUD will collect this fee from borrowers of loans guaranteed under the Section 108 Program to offset the credit subsidy costs of the guaranteed loans pursuant to commitments awarded in FY 2016, as authorized by the Continuing Appropriations Act, 2016 (Pub. L. 114– 53, approved September 30, 2015). The calculation of the FY 2016 fee, which was specified in the FY 2016 President’s Budget,1 uses the same fee calculation model as the FY 2015 proposed fee included in HUD’s February 5, 2015, notice, but incorporates updated information regarding the composition of the Section 108 portfolio and the timing of the estimated future cash flows for defaults and recoveries. The calculation of the fee is also affected by the discount rates required to be used by HUD when calculating the present value of the future cash flows as part of the Federal budget process. As described in HUD’s February 5, 2015, notice, HUD’s credit subsidy calculation is based on the amount required to fully offset the credit subsidy cost to the Federal government associated with making a Section 108 loan guarantee. As a result, HUD’s credit subsidy cost calculations incorporated assumptions based on: (i) Data on default frequency for municipal debt where such debt is comparable to loans in the Section 108 loan portfolio; (ii) data on recovery rates on collateral security for comparable municipal debt; (iii) the expected composition of the Section 108 portfolio by end users of the guaranteed loan funds (e.g., third party borrowers and public entities); and (iv) 1 The FY 2016 President’s Budget for HUD is available at: https://www.whitehouse.gov/sites/ default/files/omb/budget/fy2016/assets/hud.pdf. The fee is specified in table 6 of the Federal Credit Supplement to the 2016 budget and is available at: https://www.whitehouse.gov/sites/default/files/ omb/budget/fy2016/assets/cr_supp.pdf. E:\FR\FM\03NOR1.SGM 03NOR1 mstockstill on DSK4VPTVN1PROD with RULES Federal Register / Vol. 80, No. 212 / Tuesday, November 3, 2015 / Rules and Regulations other factors that HUD determines may be relevant to this calculation. Taking these factors into consideration, HUD determined that the fee for disbursements made under loan guarantee commitments awarded in FY 2016 is 2.58 percent, which will be applied only at the time of loan disbursements. Note that future notices may provide for a combination of upfront and periodic fees for loan guarantee commitments awarded in future fiscal years but will be subject to the public comment provisions of § 570.712(b)(2) of the final rule. As HUD discusses in response to public comment on the amount of the fee, the expected cost of a Section 108 loan guarantee is difficult to estimate using historical program data because there have been no defaults in the history of the program that required HUD to invoke its full faith and credit guarantee or use the credit subsidy reserved each year for future losses.2 This is due to a variety of factors, including the availability of Community Development Block Grant (CDBG) funds as security. As authorized by Section 108 of the Housing and Community Development Act of 1974, as amended (42 U.S.C. 5308), borrowers may make payments on Section 108 loans using CDBG grant funds. Borrowers may also make Section 108 loan payments from other anticipated sources but continue to have CDBG funds available should they encounter shortfalls in the anticipated repayment source. The fee of 2.58 percent of the principal amount of the loan will offset the expected cost to the government due to default, financing costs, and other relevant factors. To arrive at this measure, HUD analyzed data on comparable municipal debt over an extended 16 to 23 year period. The estimated rate is based on the default and recovery rates for general purpose municipal debt and industrial development bonds. The cumulative default rates on industrial development bonds (14.62 percent) were higher than the default rates on general purpose municipal debt (0.25 percent) during the period from which the data were taken. (The recovery rates for industrial development bonds and general purpose debt were 74.76 and 90.27 percent, respectively.) These two subsectors of municipal debt were chosen because their purposes and loan terms most closely resemble those of Section 108 guaranteed loans. In this regard, Section 2 U.S. Department of Housing and Urban Development, Study of HUD’s Section 108 Loan Guarantee Program, (prepared by Econometrica, Inc. and The Urban Institute), September 2012. VerDate Sep<11>2014 18:03 Nov 02, 2015 Jkt 238001 108 guaranteed loans can be broken down into two categories: (1) Loans that finance public infrastructure and activities to support subsidized housing (other than financing new construction) and (2) other development projects (e.g., retail, commercial, industrial). The 2.58 percent fee was derived by weighting the default and recovery data for general purpose municipal debt and the data for industrial development bonds according to the expected composition of the Section 108 portfolio by corresponding project type. Based on dollar amount of Section 108 loan guarantee commitments awarded during the period from FY 2010 through FY 2014, HUD expects that 25 percent of the Section 108 portfolio will be similar to general purpose municipal debt and 75 percent of the portfolio will be similar to industrial development bonds. In setting the fee at 2.58 percent of the principal amount of the guaranteed loan, HUD believes that the amount generated will fully offset the cost to the Federal government associated with making guarantee commitments awarded in FY 2016. Dated: October 26, 2015. Harriet Tregoning, Principal Deputy Assistant, Secretary for Community Planning and Development. [FR Doc. 2015–28002 Filed 11–2–15; 8:45 am] BILLING CODE 4210–67–P DEPARTMENT OF HOMELAND SECURITY Coast Guard 33 CFR Part 100 [Docket Number USCG–2015–0949] RIN 1625–AA08 Special Local Regulation; Mavericks Surf Competition, Half Moon Bay, CA Coast Guard, DHS. Temporary final rule. AGENCY: ACTION: The Coast Guard is establishing a temporary special local regulation in the navigable waters of Half Moon Bay, CA, near Pillar Point in support of the Mavericks Surf Competition, an annual invitational surf competition held at the Mavericks Break. This special local regulation will temporarily restrict vessel traffic in the vicinity of Pillar Point and prohibit vessels and persons not participating in the surfing event from entering the surf competition area. This regulation is necessary to provide for the safety of life on the navigable waters immediately prior to, during, and immediately after SUMMARY: PO 00000 Frm 00015 Fmt 4700 Sfmt 4700 67635 the surfing competition, which is held only one day during the period of November 1, 2015, through March 31, 2016. DATES: Effective date: This rule is effective November 3, 2015 through March 31, 2016. Enforcement date: This rule will be enforced on the competition day, which, if defined wave and wind conditions are met, will occur one day during the period from November 1, 2015, through March 31, 2016. This rule will be enforced from 6 a.m. until 6 p.m. on the actual competition day. ADDRESSES: To view documents mentioned in this preamble as being available in the docket, go to https:// www.regulations.gov, type USCG–2015– 0949 in the ‘‘SEARCH’’ box and click ‘‘SEARCH.’’ Click on Open Docket Folder on the line associated with this rule. FOR FURTHER INFORMATION CONTACT: If you have questions about this rulemaking, call or email Lieutenant Junior Grade Christina Ramirez, U.S. Coast Guard Sector San Francisco; telephone (415) 399–3585, email at D11PF-MarineEvents@uscg.mil. SUPPLEMENTARY INFORMATION: I. Table of Abbreviations CFR Code of Federal Regulations DHS Department of Homeland Security E.O. Executive order FR Federal Register Pub. L. Public Law § Section U.S.C. United States Code OCMI Officer in Charge of Marine Inspections NPRM Notice of Proposed Rulemaking II. Background Information and Regulatory History The Mavericks Surf Competition is a one day ‘‘Big Wave’’ surfing competition between the top 24 big wave surfers. The competition only occurs when 15– 20 foot waves are sustained for over 24 hours and are combined with mild easterly winds of no more than 5–10 knots. The rock and reef ridges that make up the sea floor of the Pillar Point area, combined with optimal weather conditions, create the large waves that Mavericks is known for. Due to the hazardous waters surrounding Pillar Point at the time of the surfing competition, the Coast Guard is establishing a special local regulation in the vicinity of Pillar Point that restricts navigation in the area of the surf competition and in neighboring hazardous areas. The Coast Guard is issuing this temporary rule without prior notice and opportunity to comment pursuant to E:\FR\FM\03NOR1.SGM 03NOR1

Agencies

[Federal Register Volume 80, Number 212 (Tuesday, November 3, 2015)]
[Rules and Regulations]
[Pages 67634-67635]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-28002]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Part 570

[Docket No. FR-5767-N-04]
RIN 2506-AC35


Section 108 Loan Guarantee Program: Announcement of Fee To Cover 
Credit Subsidy Costs

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

ACTION: Announcement of fee.

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

SUMMARY: This document announces the fee that HUD will collect from 
borrowers of loans guaranteed under the HUD's Section 108 Loan 
Guarantee Program (Section 108 Program) to offset the credit subsidy 
costs of the guaranteed loans pursuant to commitments awarded in FY 
2016, as authorized by the Continuing Appropriations Act, 2016. 
Elsewhere in today's Federal Register, HUD is publishing a final rule 
that amends its regulations to permit HUD to collect fees for Section 
108 guaranteed loans.

DATES: Effective Date: December 3, 2015.

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

    Elsewhere in today's Federal Register, HUD is publishing a final 
rule that amends the Section 108 Program regulations to establish 
additional procedures when HUD is required or authorized to collect 
fees from Section 108 borrowers to offset the costs of the Section 108 
loan guarantee commitments. Following consideration of the public 
comments submitted in response to HUD's February 5, 2015 (80 FR 6469) 
notice that proposed the fee required to offset the credit subsidy 
costs to the Federal government to guarantee Section 108 loans, HUD has 
determined to set the fee for Section 108 loan disbursements under loan 
guarantee commitments awarded in FY 2016 at 2.58 percent of the 
principal amount of the loan. As discussed below, and as HUD discusses 
in its final rule published elsewhere in today's Federal Register, HUD 
determined to not to impose a fee with respect to FY 2015 loan 
guarantee commitments. The public is directed to HUD's final rule for a 
detailed discussion by HUD of the significant issues raised by the 
public comments submitted in response to HUD's February 5, 2015, notice 
and HUD's response to those comments.

II. FY 2016 Fee: 2.58 Percent of the Principal Amount of the Loan

    This document sets the fee for Section 108 loan disbursements under 
loan guarantee commitments awarded in FY 2016 at 2.58 percent of the 
principal amount of the loan. HUD will collect this fee from borrowers 
of loans guaranteed under the Section 108 Program to offset the credit 
subsidy costs of the guaranteed loans pursuant to commitments awarded 
in FY 2016, as authorized by the Continuing Appropriations Act, 2016 
(Pub. L. 114-53, approved September 30, 2015). The calculation of the 
FY 2016 fee, which was specified in the FY 2016 President's Budget,\1\ 
uses the same fee calculation model as the FY 2015 proposed fee 
included in HUD's February 5, 2015, notice, but incorporates updated 
information regarding the composition of the Section 108 portfolio and 
the timing of the estimated future cash flows for defaults and 
recoveries. The calculation of the fee is also affected by the discount 
rates required to be used by HUD when calculating the present value of 
the future cash flows as part of the Federal budget process.
---------------------------------------------------------------------------

    \1\ The FY 2016 President's Budget for HUD is available at: 
https://www.whitehouse.gov/sites/default/files/omb/budget/fy2016/assets/hud.pdf. The fee is specified in table 6 of the Federal 
Credit Supplement to the 2016 budget and is available at: https://www.whitehouse.gov/sites/default/files/omb/budget/fy2016/assets/cr_supp.pdf.
---------------------------------------------------------------------------

    As described in HUD's February 5, 2015, notice, HUD's credit 
subsidy calculation is based on the amount required to fully offset the 
credit subsidy cost to the Federal government associated with making a 
Section 108 loan guarantee. As a result, HUD's credit subsidy cost 
calculations incorporated assumptions based on: (i) Data on default 
frequency for municipal debt where such debt is comparable to loans in 
the Section 108 loan portfolio; (ii) data on recovery rates on 
collateral security for comparable municipal debt; (iii) the expected 
composition of the Section 108 portfolio by end users of the guaranteed 
loan funds (e.g., third party borrowers and public entities); and (iv)

[[Page 67635]]

other factors that HUD determines may be relevant to this calculation.
    Taking these factors into consideration, HUD determined that the 
fee for disbursements made under loan guarantee commitments awarded in 
FY 2016 is 2.58 percent, which will be applied only at the time of loan 
disbursements. Note that future notices may provide for a combination 
of up-front and periodic fees for loan guarantee commitments awarded in 
future fiscal years but will be subject to the public comment 
provisions of Sec.  570.712(b)(2) of the final rule.
    As HUD discusses in response to public comment on the amount of the 
fee, the expected cost of a Section 108 loan guarantee is difficult to 
estimate using historical program data because there have been no 
defaults in the history of the program that required HUD to invoke its 
full faith and credit guarantee or use the credit subsidy reserved each 
year for future losses.\2\ This is due to a variety of factors, 
including the availability of Community Development Block Grant (CDBG) 
funds as security. As authorized by Section 108 of the Housing and 
Community Development Act of 1974, as amended (42 U.S.C. 5308), 
borrowers may make payments on Section 108 loans using CDBG grant 
funds. Borrowers may also make Section 108 loan payments from other 
anticipated sources but continue to have CDBG funds available should 
they encounter shortfalls in the anticipated repayment source.
---------------------------------------------------------------------------

    \2\ U.S. Department of Housing and Urban Development, Study of 
HUD's Section 108 Loan Guarantee Program, (prepared by Econometrica, 
Inc. and The Urban Institute), September 2012.
---------------------------------------------------------------------------

    The fee of 2.58 percent of the principal amount of the loan will 
offset the expected cost to the government due to default, financing 
costs, and other relevant factors. To arrive at this measure, HUD 
analyzed data on comparable municipal debt over an extended 16 to 23 
year period. The estimated rate is based on the default and recovery 
rates for general purpose municipal debt and industrial development 
bonds. The cumulative default rates on industrial development bonds 
(14.62 percent) were higher than the default rates on general purpose 
municipal debt (0.25 percent) during the period from which the data 
were taken. (The recovery rates for industrial development bonds and 
general purpose debt were 74.76 and 90.27 percent, respectively.) These 
two subsectors of municipal debt were chosen because their purposes and 
loan terms most closely resemble those of Section 108 guaranteed loans. 
In this regard, Section 108 guaranteed loans can be broken down into 
two categories: (1) Loans that finance public infrastructure and 
activities to support subsidized housing (other than financing new 
construction) and (2) other development projects (e.g., retail, 
commercial, industrial). The 2.58 percent fee was derived by weighting 
the default and recovery data for general purpose municipal debt and 
the data for industrial development bonds according to the expected 
composition of the Section 108 portfolio by corresponding project type. 
Based on dollar amount of Section 108 loan guarantee commitments 
awarded during the period from FY 2010 through FY 2014, HUD expects 
that 25 percent of the Section 108 portfolio will be similar to general 
purpose municipal debt and 75 percent of the portfolio will be similar 
to industrial development bonds. In setting the fee at 2.58 percent of 
the principal amount of the guaranteed loan, HUD believes that the 
amount generated will fully offset the cost to the Federal government 
associated with making guarantee commitments awarded in FY 2016.

    Dated: October 26, 2015.
Harriet Tregoning,
Principal Deputy Assistant, Secretary for Community Planning and 
Development.
[FR Doc. 2015-28002 Filed 11-2-15; 8:45 am]
 BILLING CODE 4210-67-P
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