[Federal Register Volume 79, Number 43 (Wednesday, March 5, 2014)]
[Notices]
[Pages 12520-12521]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-04513]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Docket No. FR-5732-N-01]


Section 184 Indian Housing Loan Guarantee Program Increase in the 
Loan Guarantee Fee

AGENCY: Office of the Assistant Secretary for Public and Indian 
Housing, HUD.

ACTION: Notice.

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SUMMARY: The Section 184 Indian Housing Loan Guarantee program (Section 
184 program) provides access to sources of private financing for Indian 
families, Indian housing authorities, and Indian tribes that otherwise 
could not acquire housing financing because of the unique legal status 
of Indian land, by guaranteeing loans to eligible persons and entities. 
Over the last 5 years, the Section 184 program has doubled the number 
of loans and eligible families being assisted by the program. For HUD 
to continue to meet the increasing demand for participation in this 
program, HUD is exercising its new authority to increase the loan 
guarantee fee to 1.5 percent of the principal obligation from the 
current rate of 1 percent.

DATES: Effective Date: April 4, 2014.

FOR FURTHER INFORMATION CONTACT: Rodger Boyd, Deputy Assistant 
Secretary for Native American Programs, Office of Public and Indian 
Housing, Department of Housing and Urban Development, 451 7th Street 
SW., Room 4126, Washington, DC 20410; telephone number 202-401-7914 
(this is not a toll-free number). Persons with hearing or speech 
disabilities may access this number through TTY by calling the toll-
free Federal Relay Service at 800-877-8339.

SUPPLEMENTARY INFORMATION:

I. Background

    Section 184 of the Housing and Community Development Act of 1992 
(Pub. L. 102-550, approved October 28, 1992), as amended by the Native 
American Housing Assistance and Self-Determination Act of 1996 (Pub. L. 
104-330, approved October 26, 1996), established the Section 184 
program to provide access to sources of private financing to Indian 
families, Indian housing authorities, and Indian tribes that otherwise 
could not acquire housing financing because of the unique legal status 
of Indian land. Because title to trust or restricted land is 
inalienable, title cannot be conveyed to eligible Section 184 program 
borrowers. As a consequence, financial institutions cannot utilize the 
land as security in mortgage lending transactions. The Section 184 
program addresses obstacles to mortgage financing on trust land and in 
other Indian and Alaska Native areas by giving HUD the authority to 
guarantee loans to eligible persons and entities to construct, acquire, 
refinance, or rehabilitate one-to-four family dwellings in these areas.
    The Section 184 Loan Guarantee Fund (the Fund) receives annual 
appropriations to cover the cost of the program. Guarantee fees and any 
other amounts, claims, notes, mortgages, contracts, and property 
acquired by the Secretary under the Section 184 program reduce the 
amount of appropriations needed to support the program, and together 
with appropriations are used to fulfill obligations of the Secretary 
with respect to the loans guaranteed under this section.
    In recent years, rapidly growing demand has increased the need for 
subsidy appropriations to support new loan guarantees. HUD issued loan 
guarantee commitments for $307 million in 2008, $508 million in 2009,

[[Page 12521]]

$552 million in 2010, $531 million in 2011, $797 million in 2012, and 
$648 million in 2013.\1\ Additionally, expenses have increased for 
acquisitions, insurance, and other program expenses, and HUD expects 
higher losses now that the Fund has guaranteed over $3.5 billion in 
current loans. Since section 184(d) of the Housing and Community 
Development Act of 1992 limited the guarantee fee to a maximum of 1 
percent of the principal obligation, HUD's guarantee fee has been set 
at 1 percent. (See 24 CFR 1005.109.) The 2013 Consolidated and Further 
Continuing Appropriations Act (Pub. L. 113-6, approved March 26, 2013) 
amended section 184(d) of the Housing and Community Development Act of 
1992, by authorizing the Secretary to increase the fee for the 
guarantee of loans up to 3 percent of the principal obligation of the 
loan and to establish the amount of the fee by publishing a notice in 
the Federal Register. Separate from this notice and published elsewhere 
in today's Federal Register, HUD updates its existing regulations to 
reflect the new authority.
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    \1\ The volume in 2013 does not represent program demand because 
during FY 2013, the program was shut down for 8 weeks and did not 
guarantee refinances, which typically accounts for 30 percent of the 
Section 184 program's business.
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II. New Loan Guarantee Fee

    To meet the growing demand for participation in the Section 184 
program, HUD is increasing the loan guarantee fee paid by borrowers to 
1.5 percent of the principal obligation. In the absence of a loan 
guarantee fee increase, if the Section 184 program received 
appropriations of $6 million for Fiscal Year (FY) 2014, that funding 
would support only about $650 million in new loan guarantee 
commitments. Considering the increasing demand for the program, this 
may force HUD to limit access to the program for some otherwise 
eligible program participants. In addition, if HUD were to limit access 
to the loan guarantee program, HUD predicts that some lenders currently 
participating in the Section 184 program may choose to no longer 
partner with HUD to provide mortgage lending through the Section 184 
program. Without those lenders, the Section 184 program would be unable 
to meet the demand for mortgage lending on trust land and in Indian and 
Alaska Native areas and tribal lands, potentially causing a further 
reduction in program activity.
    By raising the loan guarantee fee paid by borrowers to 1.5 percent 
of the principal obligation, the credit subsidy rate will go down, and 
HUD expects the program will be able to guarantee the volume of loans 
expected in FY 2014. In addition, HUD could resume refinancing off of 
trust lands in FY 2014, which was temporarily halted for all of FY 
2013. Raising the loan guarantee fee paid by borrowers to 1.5 percent 
of the principal obligation would cost the average borrower (who has a 
$175,000 mortgage) an extra $4 a month on the borrower's monthly 
payment. Even with these additional costs to borrowers, the Section 184 
program will still be affordable. While paying an increased fee may be 
a hardship for some borrowers, HUD does not believe that the extra cost 
is cost prohibitive and believes it will have a limited impact on the 
demand for the program. However, the increased fee will allow HUD to 
continue to meet the demand for new mortgage lending transactions so 
that more Indian and Alaska Native families have the opportunity for 
homeownership.\2\
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    \2\ In its Congressional Justifications for HUD's FY 2014 
budget, HUD announced that it would pursue a fee increase to 1.5 
percent in the Section 184 program. Please see page M-5 of HUD's 
Congressional Justification for the ``Indian Housing Loan Guarantee 
Fund (Section 184)'' at http://portal.hud.gov/hudportal/HUD?src=/program_offices/cfo/reports/2014/main_toc.
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    This notice places the new loan guarantee fee of 1.5 percent of the 
principal obligation of the loan in effect for all new case numbers 
assigned on or after April 4, 2014.

III. Tribal Consultation

    HUD's policy is to consult with Indian tribes early in the process 
on matters that have tribal implications. Accordingly, on September 6, 
2013, HUD sent letters to all tribal leaders participating in the 
Section 184 program, informing them of the nature of the forthcoming 
notice and soliciting comments. A summary of comments received and 
responses can be found on HUD's Web site at http://portal.hud.gov/hudportal/HUD?src=/program_offices/public_indian_housing/ih/homeownership/184.

IV. Environmental Impact

    This notice involves the establishment of a rate or cost 
determination that does not constitute a development decision affecting 
the physical condition of specific project areas or building sites. 
Accordingly, under 24 CFR 50.19(c)(6), this notice is categorically 
excluded from environmental review under the National Environmental 
Policy Act of 1969 (U.S.C. 4321).

    Dated: February 21, 2014.
Sandra B. Henriquez,
Assistant Secretary for Public and Indian Housing.
[FR Doc. 2014-04513 Filed 3-4-14; 8:45 am]
BILLING CODE 4210-67-P