Section 108 Loan Guarantee Program: Announcement of Fee To Cover Credit Subsidy Costs for FY 2024, 73532-73534 [2023-23665]
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Federal Register / Vol. 88, No. 206 / Thursday, October 26, 2023 / Rules and Regulations
determined no new requirement for
information collection is associated
with this final rule.
F. International Compatibility and
Cooperation
In keeping with U.S. obligations
under the Convention on International
Civil Aviation, the FAA’s policy is to
conform to International Civil Aviation
Organization (ICAO) Standards and
Recommended Practices to the
maximum extent practicable. The FAA
has determined no ICAO Standards and
Recommended Practices correspond to
this regulation. The FAA finds this
action is fully consistent with the
obligations under 49 U.S.C.
40105(b)(1)(A) to ensure the FAA
exercises its duties consistently with the
obligations of the United States under
international agreements.
G. Environmental Analysis
The FAA has analyzed this action
under Executive Order 12114,
Environmental Effects Abroad of Major
Federal Actions, and DOT Order
5610.1C, Paragraph 16. Executive Order
12114 requires the FAA to be informed
of environmental considerations and
take those considerations into account
when making decisions on major
Federal actions that could have
environmental impacts anywhere
beyond the borders of the United States.
The FAA has determined this action is
exempt pursuant to Section 2–5(a)(i) of
Executive Order 12114 because it does
not have the potential for a significant
effect on the environment outside the
United States.
In accordance with FAA Order
1050.1F, Environmental Impacts:
Policies and Procedures, paragraph 8–
6(c), the FAA has prepared a
memorandum for the record stating the
reason(s) for this determination and has
placed it in the docket for this
rulemaking.
V. Executive Order Determinations
ddrumheller on DSK120RN23PROD with RULES1
A. Executive Order 13132, Federalism
The FAA has analyzed this rule under
the principles and criteria of Executive
Order 13132. The agency has
determined this action will not have a
substantial direct effect on the States, or
the relationship between the Federal
Government and the States, or on the
distribution of power and
responsibilities among the various
levels of government. Therefore, this
rule will not have federalism
implications.
VerDate Sep<11>2014
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Jkt 262001
B. Executive Order 13211, Regulations
That Significantly Affect Energy Supply,
Distribution, or Use
The FAA analyzed this rule under
Executive Order 13211. The agency has
determined it is not a ‘‘significant
energy action’’ under the executive
order and will not be likely to have a
significant adverse effect on the supply,
distribution, or use of energy.
C. Executive Order 13609, Promoting
International Regulatory Cooperation
Executive Order 13609 promotes
international regulatory cooperation to
meet shared challenges involving
health, safety, labor, security,
environmental, and other issues and to
reduce, eliminate, or prevent
unnecessary differences in regulatory
requirements. The FAA has analyzed
this action under the policies and
agency responsibilities of Executive
Order 13609 and has determined that
this action will have no effect on
international regulatory cooperation.
VI. Additional Information
A. Electronic Access
Except for classified and controlled
unclassified material not authorized for
public release, all documents the FAA
considered in developing this rule,
including economic analyses and
technical reports, may be accessed from
the internet through the docket for this
rulemaking.
Those documents may be viewed
online at https://www.regulations.gov
using the docket number listed above. A
copy of this rule will be placed in the
docket. Electronic retrieval help and
guidelines are available on the website.
It is available 24 hours each day, 365
days each year. An electronic copy of
this document may also be downloaded
from the Office of the Federal Register’s
website at https://
www.federalregister.gov and the
Government Publishing Office’s website
at https://www.govinfo.gov. A copy may
also be found at the FAA’s Regulations
and Policies website at https://
www.faa.gov/regulations_policies.
Copies may also be obtained by
sending a request to the Federal
Aviation Administration, Office of
Rulemaking, ARM–1, 800 Independence
Avenue SW, Washington, DC 20591, or
by calling (202) 267–9677.
B. Small Business Regulatory
Enforcement Fairness Act
The Small Business Regulatory
Enforcement Fairness Act of 1996
(SBREFA) (Pub. L. 104–121) (set forth as
a note to 5 U.S.C. 601) requires the FAA
to comply with small entity requests for
PO 00000
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information or advice about compliance
with statutes and regulations within its
jurisdiction. A small entity with
questions regarding this document may
contact its local FAA official, or the
persons listed under the FOR FURTHER
INFORMATION CONTACT heading at the
beginning of the preamble. To find out
more about SBREFA on the internet,
visit https://www.faa.gov/regulations_
policies/rulemaking/sbre_act/.
List of Subjects in 14 CFR Part 91
Air traffic control, Aircraft, Airmen,
Airports, Aviation safety, Freight,
Ukraine.
The Amendment
In consideration of the foregoing, the
Federal Aviation Administration
amends chapter I of title 14, Code of
Federal Regulations, as follows:
PART 91—GENERAL OPERATING AND
FLIGHT RULES
1. The authority citation for part 91
continues to read as follows:
■
Authority: 49 U.S.C. 106(f), 106(g), 40101,
40103, 40105, 40113, 40120, 44101, 44111,
44701, 44704, 44709, 44711, 44712, 44715,
44716, 44717, 44722, 46306, 46315, 46316,
46504, 46506–46507, 47122, 47508, 47528–
47531, 47534, Pub. L. 114–190, 130 Stat. 615
(49 U.S.C. 44703 note); articles 12 and 29 of
the Convention on International Civil
Aviation (61 Stat. 1180), (126 Stat. 11).
§ 91.1607
■
[Reserved]
2. Remove and reserve § 91.1607.
Issued in Washington, DC, under the
authority of 49 U.S.C. 106(f) and (g),
40101(d)(1), 40105(b)(1)(A), and 44701(a)(5).
Polly E. Trottenberg,
Acting Administrator.
[FR Doc. 2023–23656 Filed 10–25–23; 8:45 am]
BILLING CODE 4910–13–P
DEPARTMENT OF HOUSING AND
URBAN DEVELOPMENT
24 CFR Part 570
[FR–6411–N–01]
Section 108 Loan Guarantee Program:
Announcement of Fee To Cover Credit
Subsidy Costs for FY 2024
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
HUD’s Section 108 Loan Guarantee
Program (Section 108 Program) to offset
SUMMARY:
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Federal Register / Vol. 88, No. 206 / Thursday, October 26, 2023 / Rules and Regulations
ddrumheller on DSK120RN23PROD with RULES1
the credit subsidy costs of the
guaranteed loans pursuant to
commitments awarded in Fiscal Year
2024 in the event HUD is required or
authorized by statute to do so,
notwithstanding subsection (m) of
section 108 of the Housing and
Community Development Act of 1974.
DATES: Applicability Date: October 1,
2023.
FOR FURTHER INFORMATION CONTACT: Paul
Webster, Director, Financial
Management Division, Office of Block
Grant Assistance, Office of Community
Planning and Development, U.S.
Department of Housing and Urban
Development, 451 7th Street SW, Room
7282, Washington, DC 20410; telephone
number 202–402–4563 (this is not a tollfree number). HUD welcomes and is
prepared to receive calls from
individuals who are deaf or hard of
hearing, as well as individuals with
speech or communication disabilities.
To learn more about how to make an
accessible telephone call, please visit
https://www.fcc.gov/consumers/guides/
telecommunications-relay-service-trs.
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 Transportation, Housing and
Urban Development, and Related
Agencies Appropriations Act, 2015
(division K of Pub. L. 113–235,
approved December 16, 2014) (2015
Appropriations Act) provided that ‘‘the
Secretary shall collect fees from
borrowers, notwithstanding subsection
(m) of such section 108, to result in a
credit subsidy cost of zero for
guaranteeing . . .’’ Section 108 loans.
Section 108(m) of the Housing and
Community Development Act of 1974
states that ‘‘No fee or charge may be
imposed by the Secretary or any other
Federal agency on or with respect to a
guarantee made by the Secretary under
this section after February 5, 1988.’’
Identical language was continued or
included in the Department’s
continuing resolutions and
appropriations acts authorizing HUD to
issue Section 108 loan guarantees
during Fiscal Years (FYs) 2016, 2017,
2018, 2019, 2020, 2021, 2022, and 2023.
The Fiscal Year (FY) 2024 HUD
appropriations bills under
consideration 1 also have identical
1 Division A, Title II of House Markup (https://
docs.house.gov/meetings/AP/AP00/20230718/
116260/BILLS-118--AP--AP00-FY24THUDFull
CommitteeMark.pdf), AND Title II of Senate Bill
S.2437 of 118th Congress (https://
www.appropriations.senate.gov/imo/media/doc/
VerDate Sep<11>2014
15:56 Oct 25, 2023
Jkt 262001
language suspending the prohibition
against charging fees for loans issued
with Section 108 guarantees after
February 5, 1988, and requiring that the
Secretary collect fees from borrowers to
result in a credit subsidy cost of zero for
the Section 108 Program.
On November 3, 2015, HUD
published a final rule (80 FR 67626) that
amended the Section 108 Program
regulations at 24 CFR part 570 to
establish additional procedures,
including procedures for announcing
the amount of the fee each fiscal year
when HUD is required to offset the
credit subsidy costs to the Federal
Government to guarantee Section 108
loans. For FYs 2016, 2017, 2018, 2019,
2020, 2021, 2022, and 2023 HUD
published notifications to set the fees.2
II. FY 2024 Fee: 1.64 Percent of the
Principal Amount of the Loan
If authorized by statute, this
document sets the fee for Section 108
loan disbursements under loan
guarantee commitments awarded for FY
2024 at 1.64 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 2024 if
either of the FY 2024 HUD
appropriations bill under consideration
is enacted, or if HUD is otherwise
required or authorized by statute to
collect fees from borrowers to offset the
credit subsidy costs of the guaranteed
loans, notwithstanding subsection (m)
of section 108 of the Housing and
Community Development Act of 1974
(42 U.S.C. 5308(m)). For this fee
announcement, HUD is not changing the
underlying assumptions or creating new
considerations for borrowers. The
calculation of the FY 2024 fee uses a
similar calculation model as the FY
2016, FY 2017, FY 2018, FY 2019, FY
2020, FY 2021, FY 2022, and FY 2023
fee notifications, 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
fy24_thud_bill_text.pdf) under the heading
‘‘Community Development Loan Guarantees
Program Account’’.
2 80 FR 67634 (November 3, 2015), 81 FR 68297
(October 4, 2016), 82 FR 44518 (September 25,
2017), 83 FR 50257 (October 5, 2018), 84 FR 35299
(July 23, 2019), 85 FR 52479 (August 26, 2020), 86
FR 59302 (October 27, 2021), and 87 FR 53662
(September 1, 2022) respectively.
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73533
present value of the future cash flows as
part of the Federal budget process.
As described in 24 CFR 570.712(b),
HUD’s credit subsidy calculation is
based on the amount required to reduce
the credit subsidy cost to the Federal
Government associated with making a
Section 108 loan guarantee to the
amount established by applicable
appropriation acts. As a result, HUD’s
credit subsidy cost calculations
incorporated assumptions based on: (1)
data on default frequency for municipal
debt where such debt is comparable to
loans in the Section 108 loan portfolio;
(2) data on recovery rates on collateral
security for comparable municipal debt;
(3) 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 (4)
other factors that HUD determined were
relevant to this calculation (e.g.,
assumptions as to loan disbursement
and repayment patterns).
Taking these factors into
consideration, HUD determined that the
fee for disbursements made under loan
guarantee commitments awarded in FY
2024 will be 1.64 percent, which will be
applied only at the time of loan
disbursements. Note that future
notifications may provide for a
combination of upfront and periodic
fees for loan guarantee commitments
awarded in future fiscal years but, if so,
HUD will provide the public an
opportunity to comment if appropriate
under 24 CFR 570.712(b)(2).
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.3
This is due to a variety of factors,
including the availability of Community
Development Block Grant (CDBG) funds
as security for HUD’s guarantee as
provided in 24 CFR 570.705(b). 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. Despite the
3 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, at
pp. 73–74. This fact has not changed since the
issuance of this report.
E:\FR\FM\26OCR1.SGM
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ddrumheller on DSK120RN23PROD with RULES1
73534
Federal Register / Vol. 88, No. 206 / Thursday, October 26, 2023 / Rules and Regulations
program’s history of no defaults, Federal
credit budgeting principles require that
the availability of CDBG funds to repay
the guaranteed loans cannot be assumed
in the development of the credit subsidy
cost estimate (see 80 FR 67629,
November 3, 2015). Thus, the estimate
must incorporate the risk that
alternative sources are used to repay the
guaranteed loan in lieu of CDBG funds,
and that those sources may be
insufficient. Based on the rate that
CDBG funds are used annually for
repayment of loan guarantees, HUD’s
calculation of the credit subsidy cost
must acknowledge the possibility of
future defaults if those CDBG funds
were not available. The fee of 1.64
percent of the principal amount of the
loan will offset the expected cost to the
Federal 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 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 were higher than the default rates
on general purpose municipal debt
during the period from which the data
were taken. 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 1.64
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 the dollar amount
of Section 108 loan guarantee
commitments awarded from FY 2018
through FY 2022, HUD expects that 58.4
percent of the Section 108 portfolio will
be similar to general purpose municipal
debt and 41.6 percent of the portfolio
will be similar to industrial
development bonds. In setting the fee at
1.64 percent of the principal amount of
the guaranteed loan, HUD expects that
the amount generated will fully offset
the cost to the Federal Government
associated with making guarantee
commitments awarded in FY 2024. Note
that the fee increased from 0.94 percent
VerDate Sep<11>2014
15:56 Oct 25, 2023
Jkt 262001
in FY 2023 to 1.64 percent in FY 2024,
an increase of 0.70 percentage points in
the level of fee charged.
This document establishes a
statutorily required fiscal requirement
in the form of a fee based on rate and
cost determinations that does 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 document is categorically excluded
from environmental review under the
National Environmental Policy Act of
1969 (42 U.S.C. 4321).
Marion M. McFadden,
Principal Deputy Assistant Secretary for
Community Planning and Development.
[FR Doc. 2023–23665 Filed 10–25–23; 8:45 am]
BILLING CODE 4210–67–P
DEPARTMENT OF HOMELAND
SECURITY
Coast Guard
33 CFR Part 100
[Docket No. USCG–2023–0817]
Special Local Regulations; Key West
World Championship, Key West, FL
Key West World Championship
regulated area identified in table 1 to
§ 100.701, paragraph (b), Item 4, from 10
a.m. to 7 p.m. on November 8, 10, and
12, 2023. This action is being taken to
provide for the safety of life on
navigable waterways during this 3-day
event. Our regulation for recurring
marine events, Sector Key West,
§ 100.701, paragraph (b), Item 4,
specifies the location of the regulated
area for the Key West World
Championship, which encompasses a
portion of the Atlantic Ocean located
southwest of Key West, Florida. During
the enforcement period, as reflected in
§ 100.701(c), all persons and vessels,
except those persons and vessels
participating in the high speed boat
races, are prohibited from entering,
transiting through, anchoring in, or
remaining within the regulated area
without obtaining permission from the
Captain of the Port Key West or a
designated representative.
In addition to this notice of
enforcement in the Federal Register, the
Coast Guard plans to provide
notification of this enforcement period
via the Local Notice to Mariners, marine
information broadcasts, or both.
AGENCY:
Jason Ingram,
Captain, U.S. Coast Guard, Captain of the
Port Key West.
ACTION:
[FR Doc. 2023–23649 Filed 10–25–23; 8:45 am]
Coast Guard, DHS.
Notification of enforcement of
regulation.
The Coast Guard will enforce
a special local regulation for the Key
West World Championship to provide
for the safety of life on navigable
waterways during this event. Our
regulation for marine events within the
Seventh Coast Guard District identifies
the regulated area for this event in Key
West, FL. During the enforcement
period, no person or vessel may enter,
transit through, anchor in, or remain
within the regulated area without
permission from the Captain of the Port
Key West or a designated representative.
DATES: The regulations in 33 CFR
100.701 will be enforced from 10 a.m.
until 7 p.m., on November 8, 10, and 12,
2023, for the location identified in
paragraph (b), Item 4 in table 1 to
§ 100.701.
BILLING CODE 9110–04–P
SUMMARY:
If
you have questions about this
notification of enforcement, call or
email Lieutenant Hailye Wilson, Sector
Key West Waterways Management
Division, Coast Guard; phone 305–292–
8768, email Hailye.M.Wilson@uscg.mil.
SUPPLEMENTARY INFORMATION: The Coast
Guard will enforce special local
regulations in 33 CFR 100.701 for the
FOR FURTHER INFORMATION CONTACT:
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FEDERAL COMMUNICATIONS
COMMISSION
47 CFR Part 8
[CG Docket No. 22–2; FCC 22–86; FR ID
179821]
Empowering Broadband Consumers
Through Transparency
Federal Communications
Commission.
ACTION: Final rule.
AGENCY:
In this document, the
Commission incorporates the
compliance dates for the broadband
consumer label rules per the Broadband
Label Order. The rules require
broadband internet access service
providers to display, at the point of sale,
labels that disclose certain information
about broadband prices, introductory
rates, data allowances, and broadband
speeds, and to include links to
information about their network
management practices, privacy policies,
and the Commission’s Affordable
Connectivity Program.
DATES: Effective date: October 26, 2023.
SUMMARY:
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]]>Agencies
[Federal Register Volume 88, Number 206 (Thursday, October 26, 2023)]
[Rules and Regulations]
[Pages 73532-73534]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-23665]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
24 CFR Part 570
[FR-6411-N-01]
Section 108 Loan Guarantee Program: Announcement of Fee To Cover
Credit Subsidy Costs for FY 2024
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 HUD's Section 108 Loan Guarantee
Program (Section 108 Program) to offset
[[Page 73533]]
the credit subsidy costs of the guaranteed loans pursuant to
commitments awarded in Fiscal Year 2024 in the event HUD is required or
authorized by statute to do so, notwithstanding subsection (m) of
section 108 of the Housing and Community Development Act of 1974.
DATES: Applicability Date: October 1, 2023.
FOR FURTHER INFORMATION CONTACT: Paul Webster, Director, Financial
Management Division, Office of Block Grant Assistance, Office of
Community Planning and Development, U.S. Department of Housing and
Urban Development, 451 7th Street SW, Room 7282, Washington, DC 20410;
telephone number 202-402-4563 (this is not a toll-free number). HUD
welcomes and is prepared to receive calls from individuals who are deaf
or hard of hearing, as well as individuals with speech or communication
disabilities. To learn more about how to make an accessible telephone
call, please visit https://www.fcc.gov/consumers/guides/telecommunications-relay-service-trs. 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 Transportation, Housing and Urban Development, and Related
Agencies Appropriations Act, 2015 (division K of Pub. L. 113-235,
approved December 16, 2014) (2015 Appropriations Act) provided that
``the Secretary shall collect fees from borrowers, notwithstanding
subsection (m) of such section 108, to result in a credit subsidy cost
of zero for guaranteeing . . .'' Section 108 loans. Section 108(m) of
the Housing and Community Development Act of 1974 states that ``No fee
or charge may be imposed by the Secretary or any other Federal agency
on or with respect to a guarantee made by the Secretary under this
section after February 5, 1988.'' Identical language was continued or
included in the Department's continuing resolutions and appropriations
acts authorizing HUD to issue Section 108 loan guarantees during Fiscal
Years (FYs) 2016, 2017, 2018, 2019, 2020, 2021, 2022, and 2023. The
Fiscal Year (FY) 2024 HUD appropriations bills under consideration \1\
also have identical language suspending the prohibition against
charging fees for loans issued with Section 108 guarantees after
February 5, 1988, and requiring that the Secretary collect fees from
borrowers to result in a credit subsidy cost of zero for the Section
108 Program.
---------------------------------------------------------------------------
\1\ Division A, Title II of House Markup (https://docs.house.gov/meetings/AP/AP00/20230718/116260/BILLS-118--AP--AP00-FY24THUDFullCommitteeMark.pdf), AND Title II of Senate Bill S.2437
of 118th Congress (https://www.appropriations.senate.gov/imo/media/doc/fy24_thud_bill_text.pdf) under the heading ``Community
Development Loan Guarantees Program Account''.
---------------------------------------------------------------------------
On November 3, 2015, HUD published a final rule (80 FR 67626) that
amended the Section 108 Program regulations at 24 CFR part 570 to
establish additional procedures, including procedures for announcing
the amount of the fee each fiscal year when HUD is required to offset
the credit subsidy costs to the Federal Government to guarantee Section
108 loans. For FYs 2016, 2017, 2018, 2019, 2020, 2021, 2022, and 2023
HUD published notifications to set the fees.\2\
---------------------------------------------------------------------------
\2\ 80 FR 67634 (November 3, 2015), 81 FR 68297 (October 4,
2016), 82 FR 44518 (September 25, 2017), 83 FR 50257 (October 5,
2018), 84 FR 35299 (July 23, 2019), 85 FR 52479 (August 26, 2020),
86 FR 59302 (October 27, 2021), and 87 FR 53662 (September 1, 2022)
respectively.
---------------------------------------------------------------------------
II. FY 2024 Fee: 1.64 Percent of the Principal Amount of the Loan
If authorized by statute, this document sets the fee for Section
108 loan disbursements under loan guarantee commitments awarded for FY
2024 at 1.64 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 2024 if either of the FY 2024 HUD
appropriations bill under consideration is enacted, or if HUD is
otherwise required or authorized by statute to collect fees from
borrowers to offset the credit subsidy costs of the guaranteed loans,
notwithstanding subsection (m) of section 108 of the Housing and
Community Development Act of 1974 (42 U.S.C. 5308(m)). For this fee
announcement, HUD is not changing the underlying assumptions or
creating new considerations for borrowers. The calculation of the FY
2024 fee uses a similar calculation model as the FY 2016, FY 2017, FY
2018, FY 2019, FY 2020, FY 2021, FY 2022, and FY 2023 fee
notifications, 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 24 CFR 570.712(b), HUD's credit subsidy calculation
is based on the amount required to reduce the credit subsidy cost to
the Federal Government associated with making a Section 108 loan
guarantee to the amount established by applicable appropriation acts.
As a result, HUD's credit subsidy cost calculations incorporated
assumptions based on: (1) data on default frequency for municipal debt
where such debt is comparable to loans in the Section 108 loan
portfolio; (2) data on recovery rates on collateral security for
comparable municipal debt; (3) 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 (4) other factors that HUD
determined were relevant to this calculation (e.g., assumptions as to
loan disbursement and repayment patterns).
Taking these factors into consideration, HUD determined that the
fee for disbursements made under loan guarantee commitments awarded in
FY 2024 will be 1.64 percent, which will be applied only at the time of
loan disbursements. Note that future notifications may provide for a
combination of upfront and periodic fees for loan guarantee commitments
awarded in future fiscal years but, if so, HUD will provide the public
an opportunity to comment if appropriate under 24 CFR 570.712(b)(2).
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.\3\ This is due to a variety of factors,
including the availability of Community Development Block Grant (CDBG)
funds as security for HUD's guarantee as provided in 24 CFR 570.705(b).
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. Despite the
[[Page 73534]]
program's history of no defaults, Federal credit budgeting principles
require that the availability of CDBG funds to repay the guaranteed
loans cannot be assumed in the development of the credit subsidy cost
estimate (see 80 FR 67629, November 3, 2015). Thus, the estimate must
incorporate the risk that alternative sources are used to repay the
guaranteed loan in lieu of CDBG funds, and that those sources may be
insufficient. Based on the rate that CDBG funds are used annually for
repayment of loan guarantees, HUD's calculation of the credit subsidy
cost must acknowledge the possibility of future defaults if those CDBG
funds were not available. The fee of 1.64 percent of the principal
amount of the loan will offset the expected cost to the Federal
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 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 were higher than the default rates on
general purpose municipal debt during the period from which the data
were taken. These two subsectors of municipal debt were chosen because
their purposes and loan terms most closely resemble those of Section
108 guaranteed loans.
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\3\ 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, at pp. 73-74. This
fact has not changed since the issuance of this report.
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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 1.64 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 the dollar amount of Section 108 loan guarantee commitments
awarded from FY 2018 through FY 2022, HUD expects that 58.4 percent of
the Section 108 portfolio will be similar to general purpose municipal
debt and 41.6 percent of the portfolio will be similar to industrial
development bonds. In setting the fee at 1.64 percent of the principal
amount of the guaranteed loan, HUD expects that the amount generated
will fully offset the cost to the Federal Government associated with
making guarantee commitments awarded in FY 2024. Note that the fee
increased from 0.94 percent in FY 2023 to 1.64 percent in FY 2024, an
increase of 0.70 percentage points in the level of fee charged.
This document establishes a statutorily required fiscal requirement
in the form of a fee based on rate and cost determinations that does
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 document is categorically excluded from
environmental review under the National Environmental Policy Act of
1969 (42 U.S.C. 4321).
Marion M. McFadden,
Principal Deputy Assistant Secretary for Community Planning and
Development.
[FR Doc. 2023-23665 Filed 10-25-23; 8:45 am]
BILLING CODE 4210-67-P
