Disaster Assistance Loan Program Changes to Maximum Loan Amounts and Miscellaneous Updates (rule, 88 FR 39335, June 16, 2023)
Summary
A direct final rule from the U.S. Small Business Administration (SBA), published in the Federal Register on June 16, 2023 (Vol. 88, No. 116), amending regulations that govern the SBA Disaster Loan Program. SBA states that the changes expand options for disaster loan recipients and reflect the impact of inflationary increases over time. The changes include an increase to the home loan lending limits, an extension of the deferment period and an expansion of mitigation options, which SBA states are intended to increase disaster survivors' access to needed disaster loan funds. The rule is effective July 31, 2023 unless SBA receives a significant adverse comment, with comments due on or before July 17, 2023. Robert Blocker is named as the contact.
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“Disaster Assistance Loan Program Changes to Maximum Loan Amounts and Miscellaneous Updates (rule, 88 FR 39335, June 16, 2023).”
Original at www.govinfo.gov. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/disaster-assistance-loan-program-changes-to-maximum-loan-amounts-and-m-7135c09e8d/
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39335
Rules and Regulations Federal Register
Vol. 88, No. 116
Friday, June 16, 2023
This section of the FEDERAL REGISTER Comment Date: Comments must be increases in home costs, the cost and
contains regulatory documents having general received on or before July 17, 2023. availability of construction materials,
applicability and legal effect, most of which ADDRESSES: You may submit comments, and significant changes in labor costs.
are keyed to and codified in the Code of identified by number 2023–0002, The current limits, established in 1994,
Federal Regulations, which is published under are inadequate to compensate many
50 titles pursuant to 44 U.S.C. 1510.
through the Federal eRulemaking Portal:
http://www.regulations.gov. Follow the disaster survivors for the costs
The Code of Federal Regulations is sold by instructions for submitting comments. associated with rebuilding, replacing
the Superintendent of Documents. SBA will post all comments on http:// and repairing their homes and
www.regulations.gov. If you wish to household effects which have been lost
submit confidential business or damaged as a result of a disaster.
SMALL BUSINESS ADMINISTRATION information (CBI) as defined in the User Housing prices have risen significantly
Notice at http://www.regulations.gov, over the past 25 years. The median price
13 CFR Part 123 please submit the information via email of a single-family house sold in the first
RIN 3245–AH91 to Robert Blocker at robert.blocker@ quarter of 1994 was only $130,000. By
sba.gov and highlight the information the end of 2021, the median price of a
Disaster Assistance Loan Program that you consider to be CBI and explain home had risen to over $400,000.1 More
Changes to Maximum Loan Amounts why you believe SBA should hold this recent increases have also been noted.
and Miscellaneous Updates information as confidential. SBA will According to the latest Producer Price
review the information and make the Index (PPI) report released by the
AGENCY: U.S. Small Business
final determination whether it will Bureau of Labor Statistics,2 the prices of
Administration.
publish the information. goods used in construction climbed
ACTION: Direct final rule.
FOR FURTHER INFORMATION CONTACT: each month during 2022 resulting in a
SUMMARY: The U.S. Small Business Robert Blocker at robert.blocker@ 19% jump in producer prices for
Administration (SBA or Agency) is sba.gov or (202) 619–0477. If you are construction for a 12-month period
amending various regulations governing deaf, hard of hearing, or have a speech ending November 2022. Additionally,
SBA’s Disaster Loan Program in order to disability, please dial 7–1–1 to access the National Association of Home
expand options for disaster loan telecommunications relay services. Builders (NAHB) price index of services
recipients as well as reflect the impact inputs to residential construction
SUPPLEMENTARY INFORMATION:
of inflationary increases over time that registered even steeper increases. As a
result in higher costs. These changes, I. Background Information result, the price index of services used
including the increase to the home loan The SBA’s Disaster Loan Program in home building (including trade
lending limits, the extension of the provides direct assistance to services, transportation and
deferment period and the expansion of homeowners, renters, businesses and warehousing) went up 15.2% since the
mitigation options, are intended to nonprofits and is critical to rebuilding start of 2022. The index increased
increase disaster survivors’ access to communities after a disaster. Pursuant 18.5% year over year. Since the start of
obtain needed disaster loan funds for to section 7(b)(1) of the Small Business the pandemic, services prices are now
the repair or replacement of a damaged Act, 15 U.S.C. 636(b)(1), SBA is 39% higher. In addition, building
property. The changes are overdue and authorized to make disaster loans materials prices increased 20.4% year
necessary due to increased costs related available to repair, rehabilitate or over year and have risen 33% since the
to construction and labor, as well as replace real or personal property start of the pandemic.3 From 2018
increases in property valuations that damaged or destroyed as a result of through 2022, approximately 8.5% of
have occurred over time. disasters. These long-term, low-interest borrowers have been unable to fully
loans support those needing to repair or restore their real estate and replace their
DATES:
replace their damaged primary personal property due to the current
Effective date: This rule is effective
residence and personal effects. In this home loan lending limits. Most recently,
July 31, 2023, unless SBA receives a
direct final rule, SBA is increasing the 64.2% of recipients of home loans for
significant adverse comment to this
damage caused by the 2021 Colorado
direct final rule by July 17, 2023 that lending limits applicable to home loans,
Wildfires, and 17.6% of such borrowers
explains why it is inappropriate, for including the limits on amounts for
from Hurricanes Fiona and Ian, were
example by persuasively challenging the repair and replacement of disaster
unable to fully restore their real estate
rule’s underlying premise or approach damaged real and personal property, for
or explaining why the rule will be refinancing, for mitigation, and for 1 Data obtained from U.S. Census Bureau and U.S.
ineffective or unacceptable without a contractor malfeasance. These changes Department of Housing and Urban Development,
change. If a timely, significant adverse are necessary as current home loan Median Sales Price of Houses Sold for the United
comment is received, the Agency will lending limitations have not been States. www.census.gov/construction/nrs/current/
index.html.
adjusted since 1994 and are insufficient
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publish a notification of withdrawal of 2 www.bls.gov/opub/ted/2022/producer-prices-
the direct final rule in the Federal to meet the needs of many homeowners for-final-demand-rose-7-4-percent-over-the-year-
Register before the effective date. Such and renters. SBA has determined that ended-november-2022.htm.
a notification might withdraw the direct these increases are necessary due to 3 National Association of Home Builders
final rule in whole or in part. inflation and higher costs for real and published Apr 15, 2022 www.nahb.org/blog/2022/
04/building-materials-prices-start-2022-with-8-
Applicability date: This rule is personal property repairs. These percent-increase and Producer Price Index News
applicable for disasters declared on or increases address the need for periodic Release—www.bls.gov/news.release/archives/ppi_
after July 31, 2023. adjustments in loan limits based on 05122022.htm.
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39336 Federal Register / Vol. 88, No. 116 / Friday, June 16, 2023 / Rules and Regulations
and replace personal property; this level disasters, reducing the need for future These changes will allow for many
of shortfall is expected to continue to financial assistance. eligible disaster survivors to obtain full
increase and impact greater numbers of recovery for their disaster losses and
Section 123.11 Does SBA require
disaster survivors in other regions. align with increases in inflation,
collateral for any of its disaster loans?
Historically, in the aftermath of construction costs and home prices. In
disasters, especially large catastrophes, Section 123.11 defines when SBA addition, SBA is removing the limit on
construction costs increase sharply as requires collateral for disaster loans. landscaping and other improvements to
demand increases and supply decreases. Paragraph (b) lists examples of available grounds, currently capped at $5,000, to
Therefore, SBA, based on statutory collateral that may be required to secure allow disaster borrowers to obtain the
authority and additional analyses cited a disaster loan, such as a lien on the necessary funds to repair their damaged
above, has determined that it is damaged or replacement property, a real estate. In accordance with the home
appropriate and necessary at this time to security interest in personal/business lending limit increase, SBA is also
increase home loan lending limits. property, or both. SBA is revising increasing the limits from $200,000 to
paragraph (b) to provide SBA more $500,000 for eligible refinancing
SBA is also increasing the initial discretion to determine the collateral
deferment period from 5 months to 12 purposes in section 123.105(a)(3), post-
that will be required for disaster loans. disaster mitigation in § 123.105(a)(4),
months, which reduces the immediate This increased flexibility will allow
financial burden for disaster survivors. and eligible malfeasance in
SBA to tailor this collateral requirement § 123.105(a)(5). These changes are based
Repair and replacement timelines often to the disaster survivor’s circumstances.
extend beyond the existing 5 months on increases in median home prices and
For example, requiring liens on property repair/replacement costs.
permitted for deferment. This creates with no liquidation value may increase
the responsibility and burden for a SBA is increasing the deferment
the cost burden to the borrower without
disaster survivor to begin making period for the first payment due in
providing meaningful liquidated
payments before their property is § 123.105(c) from 5 months to 12
recovery for SBA in the event of a
completely restored and all-in costs months from the date of the initial
default. SBA will further define
accounted for. Further, SBA is revising disbursement to reduce the financial
‘‘available collateral’’ in its Standard
its regulations to allow the SBA burden for disaster survivors. Generally,
Operating Procedures (SOP). SBA will
Administrator to increase the maximum the borrower will pay monthly
clarify in the Disaster Assistance
loan amounts to homeowners and installments of principal and interest,
Program SOP 50 30 the circumstances
renters under a specific disaster payment beginning 12 months from the
under which blanket liens on all
declaration based on appropriate date of the initial disbursement.
business assets will not be required.
economic indicators, such as current Currently, SBA has the discretion to
building costs, regional median home Section 123.13 What happens if my defer first payment due dates longer
prices, and the Consumer Price Index loan application is denied? than 5 months and frequently defers
(CPI) and the Producer Price Index (PPI) Section 123.13 addresses declined payments for 12 months on a disaster-
for the region(s). These disaster-specific applications and procedures for by-disaster basis. This change will
increases will be published in the reconsideration. Current subsection (d) create clarity and consistency across
Federal Register. refers to documentation required to disaster declarations, since each will
Finally, SBA is making other overcome SBA’s denial of the original have the same deferment period, and
revisions that will increase access to loan application and includes an will provide more time to a borrower
disaster loans and that clarify existing additional requirement for business loan recovering from a declared disaster to
requirements, as further described application reconsideration requests to start making payments on the loan. SBA
below in the section-by-section analysis. include current business financial recognizes that full disbursements are
statements. SBA is removing this not always completed immediately after
II. Section-by-Section Analysis requirement to submit current business approval and disaster recovery can be
Section 123.7 Are there restrictions on financial statements with every business an ongoing process.
how disaster loans can be used? loan reconsideration request. In Finally, in order to allow for
instances where SBA declines a loan flexibility and to match the authority
Current section 123.7 allows loan based on lack of repayment ability, already granted to the Administrator for
funds to be used to protect damaged or current business financial statements business loans,4 SBA is adding a new
destroyed real property from possible would be required. However, other paragraph (d) to § 123.105 to allow the
future similar disasters. SBA is reconsiderations not based on Administrator to increase home loan
eliminating the word ‘‘similar,’’ which repayment ability may not require this lending limits within § 123.105(a) under
allows a disaster loan recipient to use information. an individual disaster declaration based
loan funds allocated for mitigation to on appropriate economic indicators for
implement mitigation measures to Section 123.105 How much can I the region(s) in which the disaster
protect against any type of disaster. The borrow with a home disaster loan and occurred including but not limited to
elimination of ‘‘similar’’ allows disaster what limits apply on use of funds and factors such as Consumer Price Index
loan recipients more flexibility to better repayment terms? (CPI), Producer Price Index (PPI),
protect their property from future SBA is amending this regulation by median home prices and local
disasters. For example, under current increasing the stated threshold limits construction costs. After reviewing the
section 123.7, a homeowner that within each subparagraph of
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totality of circumstances, and if
suffered damage from a fire would not § 123.105(a). Specifically, SBA is determined appropriate, SBA will
be allowed to use mitigation funds to replacing ‘‘$40,000’’ with ‘‘$100,000’’ as publish any increased lending limit for
prevent earthquake damage, since the the limit for repair and replacement of an individual disaster declaration in the
damage to the home was not caused by household and personal effects. SBA is Federal Register.
an earthquake. This change provides also replacing ‘‘$200,000’’ with
disaster borrowers with more options to ‘‘$500,000’’ as the limit for repair and 4 See 15 U.S.C. 636(b)(8)(B) and 13 CFR
mitigate future damage from all types of replacement of a primary residence. 123.202(e).
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Section 123.106 What is eligible maximum SBA loan amount of § 123.203(b) from 5 months to 12
refinancing? $200,000. If the disaster survivor uses months from the date of the initial
The eligible amount of refinancing is the $100,000 of insurance proceeds to disbursement to reduce the financial
limited by the amount of physical pay down the lien SBA is refinancing, burden for disaster survivors. Generally,
damage to the home as well as the only then would SBA reduce the the borrower will pay monthly
maximum loan amount. Therefore, in amount of eligible refinancing funds by installments of principal and interest,
accordance with the increases in the $100,000 to $50,000, for a total payment beginning 12 months from the
disaster lending limits, SBA is maximum SBA loan amount of $100,000 date of the initial disbursement.
increasing the refinance limits in ($50,000 for physical damages and Currently, SBA has the discretion to
§ 123.106(b) to match the above stated $50,000 for refinancing). defer first payment due dates longer
repair/replacement lending limit of than 5 months and frequently defers
Section 123.107 How much can I
$500,000. payments for 12 months on a disaster-
borrow for post-disaster mitigation for
In addition, SBA is revising the by-disaster basis. This change will
my home?
regulation to remove certain restrictions create clarity and consistency across
In accordance with increases in the disaster declarations, since each will
on the amount of eligible refinancing. disaster loan limit discussed above, SBA
Currently, refinancing amounts cannot have the same deferment period, and
is also increasing the maximum amount will provide more time to a borrower
exceed the amount of physical damage, available for post-disaster mitigation.
less any amounts received from recovering from a declared disaster to
Current regulations limit the amount to start making payments on the loan. SBA
insurance or other recoveries, up to a the lesser of the cost of the mitigation
maximum of $200,000. SBA is revising recognizes that full disbursements are
measure, or up to 20% of the verified not always completed immediately after
§ 123.106(b) to state that refinancing loss, to a maximum of $200,000. SBA is approval and disaster recovery can be
amounts cannot exceed the amount of increasing the maximum allowed for an ongoing process.
physical damage, and the amount will post-disaster mitigation from $200,000
be reduced by any insurance or other to $500,000 to align with the real estate Section 123.301 When would my
recoveries, but only if the disaster lending limit increase. business not be eligible to apply for an
survivor uses the insurance or other economic injury disaster loan?
recoveries to pay down the mortgage or Section 123.202 How much can my SBA is removing ineligibility for
lien to be refinanced, up to a maximum business borrow with a physical disaster economic injury disaster loans for
of $500,000. This change ties the business loan? consumer or marketing cooperatives to
eligible refinancing amount to the SBA is revising paragraph (c) of align with SBA’s 7(a) and 504 business
amount of physical damage rather than § 123.202 to remove restrictions on the loan programs that currently consider
to the amount received from SBA for amount of eligible refinancing for cooperatives as eligible entities.
physical damage repairs. This change businesses. SBA is removing the Cooperatives are recognized by SBA as
also makes the regulatory language— requirement to reduce the amount of an eligible form of business organization
currently more constraining than the eligible refinancing if there is which should not be excluded from
statutory language—the same as the compensation from insurance or other disaster assistance provided to other
statutory language, removes the existing recoveries. Like the changes to business entities. As such, cooperatives
penalty on disaster borrowers with § 123.106(b) described above applicable may be eligible for economic injury
insurance, and makes more funding to home loans, SBA is revising the disaster loans, provided they meet all
available to disaster survivors for regulation to the statutory language. other program requirements. SBA is
refinancing.5 For example, under the Revised paragraph (c) requires the removing paragraph (c) in its entirety.
current regulation, if a disaster survivor refinancing amount for business loans to
suffered $150,000 in real estate damages be reduced only to the extent the lien or Section 123.502 Under what
and received $100,000 from their encumbrance to be refinanced is circumstances is your business
insurance company, SBA would reduce satisfied by insurance or other ineligible to be considered for a Military
the disaster survivor’s refinancing recoveries. Reservist Economic Injury Disaster
eligibility to $50,000—the physical In addition, and in accordance with Loan?
damages less their insurance recovery. removal of the limit on amounts for SBA is removing ineligibility for
So the borrower could receive $50,000 landscaping or recreational facilities in Military Reservist Economic Injury
for physical damages and $50,000 for § 123.105(a)(4) for home loans, SBA is Disaster loans for consumer or
refinancing, for a total maximum SBA removing similar language in marketing cooperatives for the same
loan amount of $100,000. In contrast, a § 123.202(d) applicable to business reasons as stated above. SBA is
borrower with the same damages, but no loans. Currently, SBA makes exceptions removing paragraph (j) in its entirety.
insurance, could receive $150,000 for to this limit based on documented
physical damages and $150,000 for III. Justification for Direct Final Rule
functional need on a case-by-case basis.
refinancing, for a maximum total SBA This change provides consistency and Agencies typically utilize direct final
loan amount of $300,000. With the removes the need for administrative rulemakings for non-controversial
change, some disaster survivors will exceptions and reduces administrative regulatory actions that are unlikely to
have increased refinancing eligibility. burden on the disaster survivor and receive adverse comments. In direct
Using the earlier example, the disaster SBA in securing resources to repair or final rulemaking, an agency publishes a
final rule with a statement that the rule
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survivor’s refinancing eligibility will be replace their damaged property.
$150,000, unless any amount of will go into effect unless the agency
insurance is used to reduce the lien SBA Section 123.203 What interest rate will receives significant adverse comment
is refinancing. So the borrower could my business pay on a physical disaster within a specified period. Significant
receive $50,000 for physical damages business loan and what are the adverse comments are comments that
and $150,000 for refinancing, for a total repayment terms? provide strong justifications why the
SBA is increasing the deferment rule should not be adopted or for
5 See 15 U.S.C. 636(b)(1)(B)(iv). period for the first payment due in changing the rule. If the agency receives
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39338 Federal Register / Vol. 88, No. 116 / Friday, June 16, 2023 / Rules and Regulations
no significant adverse comment in increasingly severe and frequent Compliance With Executive Orders
response to the direct final rule, the rule disasters. A higher threshold accounting 12866, 12988, 13132, 13175, 13563,
goes into effect. If the agency receives for increased average home value, 14030, the Paperwork Reduction Act
significant adverse comment, the agency inflation, and other changes is required (44 U.S.C., Ch. 35), the Congressional
withdraws the direct final rule and may to ensure nearly all disaster survivors Review Act (5 U.S.C. 801–808), and the
instead issue a proposed rulemaking. can receive full SBA assistance. Regulatory Flexibility Act (5 U.S.C.
SBA has determined that the This direct final rule changes the 601–612)
regulatory changes addressed in this maximum loan size which is well Executive Order 12866
direct final rulemaking are non-
overdue based on inflation and other The Office of Management and Budget
controversial, and not likely to result in
economic data. SBA does not anticipate has determined that this rule is a
adverse comments. SBA’s disaster loan
receiving significant adverse comments ‘‘significant regulatory action’’ under
maximums have not been increased in
because the principal effect of these Executive Order 12866. SBA has drafted
over 20 years, in part, because such
amendments is to increase the amount a Regulatory Impact Analysis for the
increase in the maximums was
unnecessary: despite the rise in the disaster survivors can borrow under the public’s information below.
costs of real estate, SBA had perennially SBA’s Disaster Assistance Loan
Program. The regulatory changes in this A. Regulatory Objective of the Rule
satisfied the lending demands of
disaster survivors, ensuring direct final rulemaking address overdue The Agency believes it needs to
homeowners could successfully rebuild. loan amount adjustments based on update its disaster home loan limits and
However, today, recent natural disasters inflation and costs over a 28-year expand access to disaster loan funds to
have demonstrated SBA’s lending limits period, the need to increase mitigation better meet the recovery needs of many
are increasingly preventing households measures that reduce taxpayer homeowners throughout the nation that
from receiving the necessary disaster investment in repeat repairs and have incurred physical damage from an
assistance to rebuild as in years past. expanding payment options for disaster unforeseen disaster. The lending limits
Over the past 20 years, SBA has survivors that assist with successful for home loans have been in place since
provided disaster assistance for 119 repayment of loans. SBA’s disaster loan 1994 and the increase would align the
disaster declarations each year on program offers long-term, low interest, SBA Disaster Program with relative
average, each of which is an emergency fixed rate loans to disaster survivors, increased costs related to construction
to the survivors. The timing, occurrence, enabling them to replace real or and labor, as well as increases in
and impact of a disaster is personal property damaged or destroyed property valuations that have occurred
unpredictable. But natural disasters are in declared disasters. It also offers such over time. According to the Bureau of
increasing in severity and in frequency loans to affected small businesses and Labor Statistics’ (BLS) consumer price
across the United States and its non-profits to help them recover from index and Zillow median house price
territories, evidenced by more severe economic injury caused by such data,7 housing prices have increased by
hurricane seasons and more frequent disasters. The changes in this direct an average of 0.85% monthly between
wildfires, tornados, floods, and final rule will not require members of May 2013 and May 2022, whereas
blizzards. This is a recent phenomenon, the public to adjust their behavior. inflation has only increased at an
and the effect on disaster survivors has Rather, the changes will benefit the average monthly rate of 0.24% over the
been exacerbated by the increase in public by allowing for increased same period.8 In light of housing prices
construction costs occasioned by the compensation to adequately reflect increasing at a faster rate than inflation,
pandemic. As stated previously, more increases in costs associated with SBA has identified a need for increasing
than 60% of borrowers from the recent replacing and repairing residential real home disaster loan lending limits.
Colorado wildfires and nearly 20% of property and household effects which Further changes in the program,
borrowers from Hurricanes Fiona and have been lost or damaged as a result of including extending the loan deferment
Ian, were unable to obtain the full a disaster. This would eliminate the for first payment due date on the loan
disaster assistance necessary because of need for many disaster borrowers to are also necessary to provide disaster
SBA’s current disaster loan maximums seek out more costly additional borrowers with flexibility in payment
and other criteria. Overall, as also noted financing options to cover potential options when dealing with and
above, on average from 2018 to 2022, shortfalls in completing repair and incurring additional expenses related to
fewer than 10% of borrowers affected by replacement projects, such as second disaster recovery. Other modernizations
a disaster have been unable to obtain mortgages and Home Equity Lines of include expanding the availability of
sufficient disaster assistance through Credit (HELOC), which incur additional mitigation measures, which supports
SBA. Further, an increasing number of closing costs, and credit cards, which the Administration’s climate resilience
insurance carriers in areas of frequent historically carry variable and/or priorities and resiliency initiative. In
disasters are insolvent and have issues punitive higher interest rates compared addition, rule updates related to
providing benefit payments to insured to disaster assistance loans (current refinancing eligibility, removing
customers.6 All disaster occurrences are average 22.91%). Other changes, such as restrictions on loans to consumer or
urgent and require the most efficient increasing the amounts available for marketing cooperatives, and enhancing
and effective path to assistance for the landscaping, refinancing, and the Administrator’s authority to adjust
survivors. In short, an increase to SBA’s mitigation, also benefit disaster loan limits for specific disaster
disaster loan maximums is no longer survivors. Due to urgent needs for declarations depending on economic
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preemptive, but now necessary to meet disaster assistance, and the indicators allows the disaster loan
current economic demands from noncontroversial nature of these program greater flexibility for
changes, SBA concludes immediate unforeseen economic conditions. These
6 See e.g., Duvall, M. (December 20, 2022). Home
action is required to support 7 For home prices: Zillow’s website and pulling
insurers are leaving Florida: Here’s what you need
to know. Retrieved from https://
homeowners, businesses, and their median sale price smoothed and seasonally
www.insurance.com/home-and-renters-insurance/ communities as they recover from future adjusted www.zillow.com/research/data/.
home-insurers-leaving-florida. disasters. 8 See CPI Home: www.bls.gov/cpi/.
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Federal Register / Vol. 88, No. 116 / Friday, June 16, 2023 / Rules and Regulations 39339
increases and expansions are necessary These calculations reflect the historical Equity Lines of Credit (HELOC), which
and long overdue for many disaster number of applicants who would incur additional closing costs, and
borrowers especially in areas of the potentially benefit from the new loan credit cards, which historically carry
country where housing and repair costs limits and the corresponding increases variable and/or punitive higher interest
have risen significantly. in their approved loan amounts. rates compared to disaster assistance
loans (current average 22.91%). Use of
B. Benefits of the Rule C. Costs of the Rule
alternate financing can make full
This regulatory action will directly SBA anticipates the calculated recovery from disasters significantly less
benefit disaster survivors by increasing subsidy from the changes will not have affordable for many survivors and
the amount of loan proceeds available as a significant impact on the overall further reduces opportunities to include
well as expanding options for mitigation subsidy rate. The initial cost to the mitigation funds for sustainable
funds and other related benefits. The Agency is de minimis. Individual recoveries. Additionally, outside
changes will allow for increased applicants will still be governed by lenders generally require collateral for
resources for disaster borrowers standard disaster loan eligibility loans which can adversely impact SBA’s
specifically accounting for regional requirements for SBA disaster assistance lien priority and collateral on secured
pricing differentials. The changes will and will remain eligible for assistance to home loans.
reflect increases in costs to replace and the extent of verifiable uncompensated SBA concluded that the revisions as
repair residential, property and loss as present regulations provide. set forth in this rule are the optimum
household effects which have been lost Based on SBA data from disaster loan available to ensure recovery is available
or damaged as a result of a physical approvals between July 2018 and July for disaster survivors. When comparing
disaster. 2022, SBA anticipates that this rule SBA’s projections to a no action
Data from disaster loan approvals change would result in an average baseline, the Agency found that between
between July 2018 and July 2022 shows annual increase of roughly $95.1 million 479 and 2,919 loan applicants per year
over 2,300 disaster home borrowers had in additional lending. The annual would potentially be excluded from the
uncompensated real estate damage that increase in loan amounts could range benefits of the higher loan limits. These
exceeded the $200,000 loan limit, of between $68.9 million and $131.1 applicants are those that qualify for
which 97% were under the $500,000 million, depending on the severity of funds greater than the previous limits of
limit. In addition, there were a larger disasters in any given year. Although $200,000 and $40,000 for real estate and
number of disaster borrowers, over the loan amounts would likely increase, personal property, respectively, who are
7,600, that had uncompensated personal SBA does not expect any significant currently forced to look to other likely
property losses that exceeded the impact to the subsidy rate given that the more costly sources to cover excess loss.
$40,000 limit, of which 94% were under historical rate of default for the disaster Table 1 displays the relative
the $100,000 limit. program trends down as loan amounts frequencies of uncompensated losses
In these cases, the disaster borrowers increase. Based on actual performance between July 2018 and July 2022, when
were limited in the amount of loan from FY 2012 through July 2022, grouped by each of the discussed loan
funds that they could receive and had approximately 221,497 home loans were limit ranges. Over this period, 29% of
to seek out more costly financing approved, of which a total 16,141 loans with real estate had
options to cover potential shortfalls in defaulted (7.2%). This portfolio default uncompensated losses between the
completing repair and replacement rate based on the size of loan is 5.2% $200,000 and $500,000 thresholds,
projects, such as second mortgages and for loans approved between $50,000 to while only 3% exceeded this threshold.
Home Equity Lines of Credit (HELOC), $200,000, decreasing to 3.75% rate of The table demonstrates that the increase
which incur additional closing costs, default for loans over $200,000. This of the disaster home loan lending limit
and credit cards, which historically data demonstrates a diminishing rate of to $500,000 for real property damage
carry variable and/or punitive higher default for larger amount loans. would cover an additional 29% of
interest rates compared to disaster There are no changes in credit and uncompensated real estate losses and
assistance loans (current average repayment consideration for loan fully cover 97% of the uncompensated
22.91%). approval determinations. SBA will real estate losses during this timeframe.
Between July 2018 and July 2022, for continue to analyze personal or business Similarly, increasing the personal
the disaster survivors whose losses cash flow to determine repayment property disaster loan limit from
exceeded the $200,000 limit in ability for those applicants who do not $40,000 to $100,000 would cover an
uncompensated losses, the annual have strong credit. In addition, the value additional 88% of uncompensated
average uncompensated loss for real of the property being repaired by the personal property losses and fully cover
estate damage was approximately disaster loan would be enhanced by 94% of disaster survivors in this
$113,027. The annual average personal additional repair/replacement funds category.
property uncompensated losses were from the increased loan amount, which
approximately $36,847. These amounts would potentially enhance SBA TABLE 1—RELATIVE FREQUENCIES OF
represent a shortfall in funds needed for collateral in the event of default. UNCOMPENSATED LOSSES
the disaster survivor to fully recover.
Based on SBA’s review of historic data, D. Alternatives [FY 2018–FY 2022]
between 479 and 2,919 loan applicants Given that the program has not
Percentages
per year would benefit from the loan increased the current lending limits of loans
limit increases for personal property since 1994, the SBA found no Category
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within
and real estate losses. There are no acceptable alternatives to the regulation category
changes to loan eligibility approval or changes. The Agency currently requires
repayment factors so these estimates are disaster survivors to seek outside Real estate (7,279)
based on the number of loan applicants financing to cover project shortfalls 0–$200K ............................... 68
who applied and were approved caused by current lending limits. $201K–$500K ....................... 29
previously but would have received the Typical alternate financing includes the >$500K ................................. 3
recovery benefit of a larger loan amount. use of second mortgages and Home
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39340 Federal Register / Vol. 88, No. 116 / Friday, June 16, 2023 / Rules and Regulations
TABLE 1—RELATIVE FREQUENCIES OF disaster loan recipients to obtain Rules that are exempt from notice and
UNCOMPENSATED LOSSES—Continued additional funds to install mitigating comment are also exempt from the RFA
[FY 2018–FY 2022]
measures to protect homes and requirements, including conducting a
businesses and reduce future property regulatory flexibility analysis, such as
Percentages damage. Expanding the scope of when—among other exceptions—the
of loans mitigation measures by not limiting agency for good cause finds that notice
Category within them to similar disasters that caused the and public procedure are impracticable,
category original damage will allow for more unnecessary, or contrary to the public
options and give more flexibility for the interest. SBA Office of Advocacy Guide:
Personal Property (8,174)
recipient to utilize the funds. In How to Comply with the Regulatory
0–$40K ................................. 6 addition, the regulations allow physical Flexibility Act, Ch.1. p.9. Since this rule
$41K–$100K ......................... 88 disaster loan recipients additional is exempt from notice and comment,
>$100K ................................. 6 funding of up to 20 percent of the SBA is not required to conduct a
verified loss to cover costs related to regulatory flexibility analysis.
Executive Order 12988 these measures. Increasing the
maximum amount of mitigation funding List of Subjects in 13 CFR Part 123
This action meets applicable
standards set forth in sections 3(a) and from $200,000 to $500,000 will assist in Disaster assistance, Loan mitigation,
3(b)(2) of Executive Order 12988, Civil encouraging the use of proceeds for Loan programs—physical disaster
Justice Reform, to minimize litigation, mitigation measures. These changes (home, business).
eliminate ambiguity, and reduce align with the intent of Executive Order For the reasons set forth in the
burden. The action does not have 14030 in that they expand the range of preamble, the SBA amends 13 CFR part
preemptive effect or retroactive effect. mitigation measures that a disaster 123 as follows:
survivor can use to prevent future loss
Executive Order 13132 from subsequent disasters. PART 123—DISASTER LOAN
This rule does not have federalism Paperwork Reduction Act, 44 U.S.C. Ch. PROGRAM
implications as defined in Executive 35
Order 13132. It will not have substantial ■ 1. The authority citation for part 123
direct effects on the States, on the SBA has determined that this rule continues to read as follows:
relationship between the National does not impose additional reporting or Authority: 15 U.S.C. 632, 634(b)(6), 636(b),
Government and the States, or on the recordkeeping requirements under the 636(d), 657n, and 9009.
distribution of power and Paperwork Reduction Act, 44 U.S.C.,
Chapter 35. § 123.7 [Amended]
responsibilities among the various
levels of government, as specified in the Congressional Review Act, 5 U.S.C. Ch. ■ 2. Amend § 123.7 by removing the
Executive Order. As such it does not 8 word ‘‘similar’’.
warrant the preparation of a Federalism ■ 3. Amend § 123.11 by revising
Subtitle E of the Small Business
Assessment. paragraph (b) to read as follows:
Regulatory Enforcement Fairness Act of
Executive Order 13175 1996, also known as the Congressional
§ 123.11 Does SBA require collateral for
This rule does not have Tribal Review Act or CRA, generally provides any of its disaster loans?
implications under Executive Order that before a rule may take effect, the
agency promulgating the rule must * * * * *
13175, Consultation and Coordination (b) For loans larger than the amounts
with Indian Tribal Governments, submit a rule report, which includes a
copy of the rule, to each House of the outlined in paragraph (a) of this section,
because it does not have a substantial you will be required to provide
direct effect on one or more Indian Congress and to the Comptroller General
of the United States. SBA will submit a available collateral, as determined by
Tribes, on the relationship between the SBA, such as a lien on the damaged or
Federal Government and Indian tribes, report containing this rule and other
required information to the U.S. Senate, replacement property and/or a security
or on the distribution of power and interest in business assets.
responsibilities between the Federal the U.S. House of Representatives, and
Government and Indian Tribes. the Comptroller General of the United * * * * *
States. A major rule under the CRA § 123.13 [Amended]
Executive Order 13563 cannot take effect until 60 days after it
A description of the need for this is published in the Federal Register. ■ 4. Amend § 123.13 in paragraph (d) by
regulatory action and benefits and costs The Office of Information and removing the second sentence.
associated with this action, including Regulatory Affairs has determined that ■ 5. Amend § 123.105 by revising
possible distributional impacts that this rule is not a ‘‘major rule’’ as defined paragraphs (a) and (c) and adding
relate to Executive Order 13563, are by 5 U.S.C. 804(2). Therefore, this rule paragraph (d) to read as follows:
included above in the Regulatory Impact is not subject to the 60-day restriction.
Analysis under Executive Order 12866. § 123.105 How much can I borrow with a
Regulatory Flexibility Act, 5 U.S.C. 601 home disaster loan and what limits apply on
Executive Order 14030 The Regulatory Flexibility Act (RFA), use of funds and repayment terms?
SBA was tasked with developing 5 U.S.C. 601–612, generally requires (a) There are limits on how much
recommendations for improving how that when an agency issues a proposed money you can borrow for particular
ddrumheller on DSK120RN23PROD with RULES1
federal financial management and rule, or a final rule pursuant to section purposes. The limits in effect for
reporting can incorporate climate- 553(b) of the APA or another law, the disasters occurring on or after June 16,
related financial risk, especially as that agency must prepare a regulatory 2023 are as follows.
risk relates to Federal lending programs. flexibility analysis that meets the (1) $100,000 for repair or replacement
The SBA disaster loan program contains requirements of the RFA and publish of household and personal effects;
eligibility and additional loan funds for such analysis in the Federal Register. 5 (2) $500,000 for repair or replacement
mitigation measures that allow physical U.S.C. 603, 604. of a primary residence (including
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Federal Register / Vol. 88, No. 116 / Friday, June 16, 2023 / Rules and Regulations 39341
upgrading in order to meet minimum liens on both damaged real property and the no-back pawl installation, and
standards of safety and decency or machinery and equipment. Such corrective action. The FAA is issuing
current building code requirements); amount shall be reduced to the extent this AD to address the unsafe condition
(3) $500,000 for eligible refinancing such lien or encumbrance is satisfied by on these products.
purposes; insurance or otherwise. Your business DATES: This AD is effective July 21,
(4) 20 percent of the verified loss (not property must be totally destroyed or 2023.
including refinancing or malfeasance), substantially damaged, which means: The Director of the Federal Register
before deduction of compensation from * * * * * approved the incorporation by reference
other sources, up to a maximum of of certain publications listed in this AD
■ 9. Amend § 123.203 by revising
$500,000 for post-disaster mitigation as of July 21, 2023.
(see § 123.107); and paragraph (b) as follows:
ADDRESSES:
(5) $500,000 for eligible malfeasance, § 123.203 What interest rate will my AD Docket: You may examine the AD
pursuant to § 123.18. business pay on a physical disaster docket at regulations.gov under Docket
* * * * * business loan and what are the repayment
No. FAA–2023–0439; or in person at
(c) SBA determines the loan maturity terms?
Docket Operations between 9 a.m. and
and repayment terms based on your * * * * * 5 p.m., Monday through Friday, except
needs and your ability to pay. Generally, (b) Generally, you will pay monthly Federal holidays. The AD docket
you will pay monthly installments of installments of principal and interest, contains this final rule, the mandatory
principal and interest, beginning twelve beginning twelve months from the date continuing airworthiness information
months from the date of the initial of the initial disbursement. SBA will (MCAI), any comments received, and
disbursement. SBA will consider other consider other payment terms if you other information. The address for
payment terms if you have seasonal or have seasonal or fluctuating income. Docket Operations is U.S. Department of
fluctuating income. The maximum There is no penalty for prepayment for Transportation, Docket Operations, M–
maturity for a home disaster loan is 30 disaster loans. 30, West Building Ground Floor, Room
years. There is no penalty for * * * * * W12–140, 1200 New Jersey Avenue SE,
prepayment of disaster loans. Washington, DC 20590.
(d) The SBA Administrator may § 123.301 [Amended]
Material Incorporated by Reference:
increase the home loan lending limits ■ 10. Amend § 123.301 by removing and • For service information identified
within paragraph (a) of this section reserving paragraph (c). in this final rule, contact Bombardier
under an individual disaster declaration Business Aircraft Customer Response
based on appropriate economic § 123.502 [Amended] Center, 400 Côte-Vertu Road West,
indicators for the region(s) in which the ■ 11. Amend § 123.502 by removing and Dorval, Québec H4S 1Y9, Canada;
disaster occurred. SBA will publish any reserving paragraph (j). telephone 514–855–2999; email ac.yul@
increased lending limit for an aero.bombardier.com; website
individual disaster declaration in the Isabella Casillas Guzman,
bombardier.com.
Federal Register. Administrator. • You may view this service
[FR Doc. 2023–12779 Filed 6–15–23; 8:45 am] information at the FAA, Airworthiness
■ 6. Amend § 123.106 by revising
paragraph (b) to read as follows: BILLING CODE 8026–09–P Products Section, Operational Safety
Branch, 2200 South 216th St., Des
§ 123.106 What is eligible refinancing? Moines, WA. For information on the
* * * * * DEPARTMENT OF TRANSPORTATION availability of this material at the FAA,
(b) Your home disaster loan for call 206–231–3195. It is also available at
refinancing existing liens or Federal Aviation Administration regulations.gov under Docket No. FAA–
encumbrances cannot exceed an amount 2023–0439.
equal to the lesser of $500,000, or the 14 CFR Part 39 FOR FURTHER INFORMATION CONTACT:
physical damage to your primary Chirayu Gupta, Aviation Safety
residence. Any refinancing amount will [Docket No. FAA–2023–0439; Project
Identifier MCAI–2022–01263–T; Amendment Engineer, FAA, 1600 Stewart Avenue,
be reduced to the extent such lien or 39–22449; AD 2023–11–04] Suite 410, Westbury, NY 11590;
encumbrance is satisfied by insurance telephone 516–228–7300; email 9-avs-
or otherwise. RIN 2120–AA64 nyaco-cos@faa.gov.
§ 123.107 [Amended] Airworthiness Directives; Bombardier, SUPPLEMENTARY INFORMATION:
■ 7. Amend § 123.107 by removing the Inc., Airplanes Background
number ‘‘$200,000’’ and adding in its The FAA issued a notice of proposed
AGENCY: Federal Aviation
place the number ‘‘$500,000’’. rulemaking (NPRM) to amend 14 CFR
Administration (FAA), DOT.
■ 8. Amend § 123.202 by: part 39 by adding an AD that would
ACTION: Final rule.
■ a. Revising paragraph (c) introductory apply to certain Bombardier, Inc., Model
text; SUMMARY: The FAA is adopting a new BD–100–1A10 airplanes. The NPRM
■ b. Removing paragraph (d); and
airworthiness directive (AD) for certain published in the Federal Register on
■ c. Redesignating paragraph (e) as
Bombardier, Inc., Model BD–100–1A10 March 24, 2023 (88 FR 17748). The
paragraph (d).
airplanes. This AD was prompted by a NPRM was prompted by AD CF–2022–
ddrumheller on DSK120RN23PROD with RULES1
The revision reads as follows:
report that a design deficiency was 55, dated September 21, 2022, issued by
§ 123.202 How much can my business discovered which could allow a no-back Transport Canada, which is the aviation
borrow with a physical disaster business pawl to be incorrectly installed in a authority for Canada (referred to after
loan? horizontal stabilizer trim actuator this as the MCAI). The MCAI states that
* * * * * (HSTA). This AD requires a check for during an unscheduled inspection, a
(c) Physical disaster business part number and serial numbers of the design deficiency was discovered which
borrowers may request refinancing of HSTA, and if necessary, inspection of could allow a no-back pawl to be
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