[Federal Register Volume 81, Number 211 (Tuesday, November 1, 2016)]
[Notices]
[Pages 75836-75837]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-26331]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Docket No. FR-5974-N-01]


Section 184 Indian Housing Loan Guarantee Program Increase to 
Annual Premium

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) is a home mortgage program specifically designed for 
American Indian and Alaska Native families, Alaska villages, tribes, or 
tribally designated housing entities. Over the last five 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 authority to increase the annual premium to the borrower from 0.15 
to 0.25 percent of the remaining loan balance. This annual premium will 
continue until the unpaid principal balance, excluding the upfront loan 
guarantee fee, reaches 78 percent of the lower of the initial sales 
price or appraised value based on the initial amortization schedule. 
Effective December 1, 2016 the new annual premium of 0.25 percent of 
the remaining loan balance will apply to all new loan guarantees, 
including refinances.

DATES: Effective Date: December 1, 2016.

FOR FURTHER INFORMATION CONTACT: Heidi J. Frechette, 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) and 2013 Consolidated and Further 
Continuing Appropriations Act (Pub. L. 113-6, approved March 26, 2013), 
established the Section 184 program to provide access to sources of 
private mortgage financing to Indian families, Indian housing 
authorities, and Indian tribes. Congress established this program in 
1992 to facilitate homeownership and increase access to capital in 
Native American Communities. 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) is used to fulfill 
obligations of the Secretary with respect to the loans guaranteed under 
this program. The Fund receives annual appropriations to cover the cost 
of the program, and amounts for claims, notes, mortgages, contracts, 
and property acquired by the Secretary under the Section 184 program, 
which reduces the amount of appropriations needed to support the 
program. In recent years, rapidly growing demand has required HUD to 
increase the guarantee premium and implement a new annual upfront fee 
to support new loan guarantees. HUD issued loan guarantee commitments 
for $495.4 million in fiscal year (FY) 2011, $670.8 million in FY 2012, 
$672.3 million in FY 2013, $595 million in FY 2014, $738.1 million in 
FY 2015, and $756.3 million in FY 2016.\1\ Additionally, expenses have 
increased for acquisitions, insurance, and other program costs, and HUD 
has seen higher losses now that the Fund has guaranteed over $5.5 
billion in current loans.
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    \1\ Year-to-date cumulative report totaling Section 184 loans 
guaranteed through end of July 2016.
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    On October 7, 2014, HUD issued a notice exercising its new 
statutory authority to implement an annual premium to the borrower in 
the amount of 0.15 percent. (79 FR 60492). The notice also provided 
guidance on the cancellation of the annual premium when the loan 
reaches the 78 percent loan-to-value ratio. The new annual premium 
became effective on November 15, 2014 for all new loan guarantees, 
including refinances.

II. Increased Premium

    To meet projected demand for participation in the Section 184 
program for FY 2017, HUD is increasing the annual premium from 0.15 to 
0.25 percent of the remaining loan balance until the unpaid principal 
balance, excluding the upfront loan guarantee fee, reaches 78 percent 
of the lower of the initial sales price or appraised value based on the 
initial amortization schedule on all new loans, including refinances. 
This increase will apply to all new program applicants as of the 
effective date of this notice. It will not apply to existing mortgages 
guaranteed by this program. Without an increase in the annual premium, 
HUD will not have sufficient funding to the meet the anticipated demand 
for Section 184 mortgage loans in FY 2017. The decision to increase the 
annual loan guarantee premium provides a balanced approach that 
addresses the current demands for the program while focusing on the 
need to remain affordable.
    By increasing the annual premium paid by borrowers, the credit 
subsidy rate \2\ will go down, and HUD expects the program will be able 
to guarantee the volume of loans predicted for FY 2017. An annual 
premium of 0.25 percent would cost a borrower with a $175,000 mortgage 
(the average loan size for the program) an extra $36.18 a month in 
total monthly fees on the borrower's monthly payment or $434.16 
annually. Since the 0.25 percent annual premium is tied to the loan 
balance, the annual premium will decrease for the borrower every year 
as the loan balance declines and then disappear after the loan-to-value 
ratio reaches 78 percent of the lower of the initial sales price or 
appraised value based on the initial amortization schedule. Even with 
these additional costs to borrowers, the Section 184 program will still 
be one of the least expensive loan products available to Native 
borrowers. While

[[Page 75837]]

paying an annual premium may be a hardship for some potential 
borrowers, HUD believes it will have a limited impact on the demand for 
the program, and the new annual premium will allow HUD to continue to 
meet the demand for mortgage lending transactions in fiscal year 2017 
so that more Indian and Alaska Native families have the opportunity to 
become homeowners.
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    \2\ Credit Subsidy Rate as defined in the Federal Credit Reform 
Act (FCRA) of 1990, as amended by the Balanced Budget Act of 1997.
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    To reduce some of the impact accompanying the annual premium, the 
payment of the annual premium can be made through monthly payments, to 
spread out the cost for borrowers, or annual and lump sum payments, to 
keep a borrower's monthly payment lower.
    This notice increases the Section 184 program annual premium to 
0.25 percent of the remaining loan balance for all new case numbers 
assigned on or after December 1, 2016 until the unpaid principal 
balance, excluding the upfront loan guarantee fee, reaches 78 percent 
of the lower of the initial sales price or appraised value based on the 
initial amortization schedule.
    This notice does not supersede HUD's guidance on the cancellation 
of the annual premium when the loan reaches the 78 percent loan-to-
value ratio that was provided in the October 7, 2014 Notice (79 FR 
60492).

IV. Tribal Consultation

    HUD's policy is to consult with Indian tribes early in the process 
on matters that have tribal implications. Accordingly, on June 26, 
2016, 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.

V. 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: October 24, 2016.
Lourdes Castro Ramirez,
Principal Deputy Assistant Secretary for Public and Indian Housing.
[FR Doc. 2016-26331 Filed 10-31-16; 8:45 am]
 BILLING CODE 4210-67-P