44518 Federal Register / Vol. 82, No. 184 / Monday, September 25, 2017 / Rules and Regulations 

1 80 FR 67634 (November 3, 2015) and 81 FR 

68297 (October 4, 2016), respectively. 

2 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. 

DEPARTMENT OF HOUSING AND 

URBAN DEVELOPMENT 

24 CFR Part 570 

[Docket No. FR–5767–N–06] 

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: Notification of fees. 

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 

the credit subsidy costs of the 

guaranteed loans pursuant to 

commitments awarded in FY 2018. 

DATES: Applicability Date: October 25, 

2017. 

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 202–402–4563 (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: 

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 . . . to result in a credit 

subsidy cost of zero for guaranteeing’’ 

Section 108 loans. 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 2016 and 

2017 (Pub. L. 114–53, 114–113, and 

115–31). Section 101(a) of the 

Continuing Appropriations Act, 2018 

(Division D of Pub. L. 115–56, approved 

September 8, 2017) includes the costs of 

HUD loan guarantees generally in its 

continuation of fiscal year 2017 

programs. Additionally, the Senate 

appropriations bill under consideration 

(S. 1655) and the House omnibus bill 

(H.R. 3354) have identical language 

regarding the fees and credit subsidy 

cost 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 fiscal years 2016 and 2017, 

HUD issued notices to set the fees.1

II. FY 2018 Fee: 2.365 Percent of the 

Principal Amount of the Loan 

This document sets the fee for Section 

108 loan disbursements under loan 

guarantee commitments awarded for FY 

2018 at 2.365 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 2018. 

For this fee notice, HUD is not 

changing the underlying assumptions or 

creating new considerations for 

borrowers. The calculation of the FY 

2018 fee uses the same fee calculation 

model as the FY 2016 and FY 2017 final 

notices, 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: (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) 

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 

2018 will be 2.365 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, if so, 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.2

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 

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 take into account the possibility of 

future defaults if those CDBG funds 

were not available. The fee of 2.365 

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 


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Federal Register / Vol. 82, No. 184 / Monday, September 25, 2017 / Rules and Regulations 44519 

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 2.365 

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 during the 

period from FY 2012 through FY 2016, 

HUD expects that 30 percent of the 

Section 108 portfolio will be similar to 

general purpose municipal debt and 70 

percent of the portfolio will be similar 

to industrial development bonds. In 

setting the fee at 2.365 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 2018. Note that the FY 

2018 fee represents a 0.225 percent 

decrease from the FY 2017 fee of 2.59 

percent. This is due primarily to 

updated loan repayment patterns and 

discount rates used in calculating the 

present value of cash flows. These are 

variables that ordinarily are modified in 

the credit subsidy calculation. 

This document establishes a rate 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). 

Dated: September 12, 2017. 

Neal Rackleff, 

Assistant Secretary for Community Planning 

and Development. 

[FR Doc. 2017–20474 Filed 9–22–17; 8:45 am] 

BILLING CODE 4210–67–P 

ENVIRONMENTAL PROTECTION 

AGENCY 

40 CFR Part 52 

[EPA–R04–OAR–2009–0226; FRL–9968–17– 

Region 4] 

Air Plan Approval; GA: Emission 

Reduction Credits 

AGENCY: Environmental Protection 

Agency. 

ACTION: Direct final rule. 

SUMMARY: The Environmental Protection 

Agency (EPA) is taking direct final 

action to approve changes to the Georgia 

State Implementation Plan (SIP) to 

revise the Emission Reduction Credits 

(ERC) regulation. EPA is approving 

portions of the SIP revision submitted 

by the State of Georgia, through the 

Georgia Department of Natural 

Resources’ Environmental Protection 

Division (GA EPD) on September 15, 

2008. The revision expands the 

eligibility for sources in Barrow County 

that can participate in the ERC Program, 

adds a provision for reevaluation of the 

Certificates of ERC, changes the 

administrative fees, and eliminates an 

exemption for certain types of ERCs. 

This action is being taken pursuant to 

the Clean Air Act (CAA or Act). 

DATES: This direct final rule is effective 

November 24, 2017 without further 

notice, unless EPA receives adverse 

comment by October 25, 2017. If EPA 

receives such comments, it will publish 

a timely withdrawal of the direct final 

rule in the Federal Register and inform 

the public that the rule will not take 

effect. 

ADDRESSES: Submit your comments, 

identified by Docket ID No. EPA–R04– 

OAR–2009–0226 at http://

www.regulations.gov. Follow the online 

instructions for submitting comments. 

Once submitted, comments cannot be 

edited or removed from Regulations.gov. 

EPA may publish any comment received 

to its public docket. Do not submit 

electronically any information you 

consider to be Confidential Business 

Information (CBI) or other information 

whose disclosure is restricted by statute. 

Multimedia submissions (audio, video, 

etc.) must be accompanied by a written 

comment. The written comment is 

considered the official comment and 

should include discussion of all points 

you wish to make. EPA will generally 

not consider comments or comment 

contents located outside of the primary 

submission (i.e., on the web, cloud, or 

other file sharing system). For 

additional submission methods, the full 

EPA public comment policy, 

information about CBI or multimedia 

submissions, and general guidance on 

making effective comments, please visit 

http://www2.epa.gov/dockets/ 

commenting-epa-dockets. 

FOR FURTHER INFORMATION CONTACT: 

Sean Lakeman, Air Regulatory 

Management Section, Air Planning and 

Implementation Branch, Air, Pesticides 

and Toxics Management Division, U.S. 

Environmental Protection Agency, 

Region 4, 61 Forsyth Street SW., 

Atlanta, Georgia 30303–8960. Mr. 

Lakeman can be reached via telephone 

at (404) 562–9043 or via electronic mail 

at lakeman.sean@epa.gov. 

SUPPLEMENTARY INFORMATION: 

I. Background 

On September 15, 2008, GA EPD 

submitted a SIP revision to EPA for 

approval that involves changes to 

Georgia’s emissions reduction credits 

rule and the administrative fees found 

in Georgia Rule 391–3–1–.03(13). Rule 

391–3–1–.03(13) provides for the 

creation, banking, transfer, and use of 

nitrogen oxides (NOX) and volatile 

organic compounds (VOC) ERCs in 

Federally designated ozone 

nonattainment areas in Georgia and 

administrative fees associated with the 

ERC Program. 

GA EPD oversees the ERC Program, 

which was created in 1999 and 

approved into Georgia’s SIP on July 10, 

2001 (66 FR 35906). The ERC Program 

facilitates construction permitting for 

major emission sources that are subject 

to Nonattainment New Source Review 

(NNSR) permitting in Georgia ozone 

nonattainment areas. Emissions point 

sources within the 25-county area 

surrounding Atlanta that require Best 

Available Control Technology (BACT) 

and offset permitting are also eligible for 

the ERC Program. 

The ERC Program allows eligible 

sources that voluntarily reduce 

emissions in the affected counties to 

certify and ‘‘bank’’ these reductions as 

ERCs for future use by themselves or 

others. The banked ERCs hold their 

value for ten years, at which point they 

begin devaluing ten percent per year 

until they have reached 50 percent of 

their original value. The ERC Program is 

intended to help the Atlanta area 

achieve compliance with federal 

standards for ground-level ozone. The 


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