Disaster Assistance Loan Program Changes to Unsecured Loan Amounts and Credit Elsewhere Criteria — U.S. Small Business Administration, 13 CFR Part 123 (Federal Register, Vol. 89, No. 142, July 24, 2024)
Summary
The U.S. Small Business Administration's direct final rule in the Federal Register of Wednesday, July 24, 2024 (Vol. 89, No. 142) changes its Disaster Loan Program rules at 13 CFR Part 123 (RIN 3245–AI08). It raises the unsecured loan threshold to $50,000 for EIDL loans for all disasters and for physical home and business loans under Major Disaster declarations. The rule says the collateral threshold for major disasters and EIDL has been at $25,000 since 2014, and for SBA Agency disasters $14,000 since 2008, despite cost and inflationary increases. It also revises how SBA determines whether an applicant has credit elsewhere, to modernize and replace the current process. The rule is effective September 9, 2024, unless SBA receives a significant adverse comment. The same pages also print unrelated FAA rules.
Summary drafted by a model from the document's text below and checked by script against that text before publication. It is a navigation aid, not a reading of what the document proves. Where AI is used
Full text
59826 Federal Register / Vol. 89, No. 142 / Wednesday, July 24, 2024 / Rules and Regulations
SMALL BUSINESS ADMINISTRATION I. Background Information when SBA will aggregate physical home
SBA’s Disaster Loan Program provides and business loans and or EIDL loans to
13 CFR Part 123 direct assistance to homeowners, the same borrowers and affiliates to
RIN 3245–AI08 renters, businesses, and nonprofits, determine if collateral is required.
which is critical to rebuilding The collateral threshold for major
Disaster Assistance Loan Program communities after a disaster. Pursuant disasters and EIDL across all declaration
Changes to Unsecured Loan Amounts types, has been at $25,000 since 2014.
to section 7(b) of the Small Business
and Credit Elsewhere Criteria The collateral threshold for SBA Agency
Act, 15 U.S.C. 636(b) (the Act), SBA is
disasters has been $14,000 since 2008,
AGENCY: U.S. Small Business authorized to make direct loans to
except for a temporary increase to
Administration. homeowners, renters, businesses, and
$25,000 in 2015. These amounts have
non-profit organizations that have been
ACTION: Direct final rule. not been updated despite cost and
adversely affected by a disaster. The Act
inflationary increases.
SUMMARY: This direct final rule amends authorizes the Administrator to increase SBA is revising paragraphs (a)(1) and
the U.S. Small Business Administration the SBA’s size limits on unsecured (2) to increase the unsecured loan
(SBA or Agency) regulations governing disaster loans for physical damages in threshold to $50,000 for EIDL loans for
the SBA Disaster Loan Program by Major Disasters and for EIDL loans for all disasters and for physical home and
revising how it determines whether an all disaster declarations except Military business loans for Major Disaster
applicant has credit elsewhere to Reservist Economic Injury Disaster declarations. SBA believes the current
modernize and replace the current Loans (MREIDL). (See 15 U.S.C. collateral threshold of $25,000
process. SBA is also increasing the 636(d)(6)) SBA is further authorized to unnecessarily prevents borrowers from
unsecured threshold for physical set a low-interest rate for individuals receiving adequate funds to completely
damage loans under Major Disaster and businesses that SBA determines are recover after a disaster. A recent
declarations and for Economic Injury unable to obtain credit elsewhere and to working paper published by the
Disaster Loans (EIDL) under all disaster set a market interest rate for the National Bureau of Economic Research
declarations. individuals and businesses that can (NBER working paper) used SBA
DATES: obtain credit elsewhere. disaster loan application and loan
Effective date: This rule is effective With natural disasters increasing in performance data to analyze the effect of
September 9, 2024, unless SBA receives severity and frequency across the collateral requirements on borrower
a significant adverse comment to this United States and its territories, SBA is behavior and default rates.1 Using data
direct final rule. If a timely, significant increasing the maximum unsecured from 2005 to 2018, the authors
adverse comment is received, the loan limits for home and business loans determined that 38 percent of all
Agency will publish a notification of declared for Major Disasters and for borrowers with losses above the secured
withdrawal of the direct final rule in the EIDL loans for all disaster declaration threshold tended to borrow less money
Federal Register before the effective types. SBA is also revising the method than they were eligible, because many
date. used to determine whether an applicant have first liens (some had second liens),
Applicability date: This rule is has credit elsewhere. on their property. As a result, there is
applicable for disasters declared on or SBA believes these changes are little to no justification for further
after September 9, 2024. necessary to: leveraging a property with insufficient
• Address limits due to inflation. equity. The study concluded that the
Comment date: Comments must be • Increase efficiencies in the
received on or before August 23, 2024. median Disaster Loan Program borrower
administration and delivery of the forgoes up to 40 percent of their loan
ADDRESSES: You may submit comments, program to better achieve mission and
identified by the Regulation Identifier eligibility to minimize additional liens
improve outcomes for economic on their property. The result is that
Number (RIN) 3245–AI08, through the recovery. borrowers make decisions that may
Federal eRulemaking Portal: https:// • Increase the percentage of
www.regulations.gov. Follow the result in insufficient funds to repair
borrowers utilizing the SBA mitigation
instructions for submitting comments. their home adequately and replace
program which is designed to prevent
SBA will post all comments on personal property. The NBER working
future disaster damages and reduce paper authors estimated that over $1.1
https://www.regulations.gov. If you wish future disaster economic impacts. billion in eligible loan funds were not
to submit confidential business • Reduce the burden of collateral and
information (CBI) as defined in the User disbursed due to borrowers electing to
improve access to credit in underserved
Notice at https://www.regulations.gov, keep loan amounts below the collateral
communities which oftentimes have
please submit the information via email threshold.
limited access to other sources of capital SBA expects the increase in the
to Robert Blocker at robert.blocker@ and historically have seen higher rates
sba.gov and highlight the information unsecured loan limit will result in
of disasters and lower economic increased use by disaster survivors of
that you consider to be CBI and explain survival rates.
why you believe SBA should hold this additional available funds, which may
information as confidential. SBA will II. Section-by-Section Analysis include funds SBA makes available
review the information and make the specifically for mitigation uses that
Section 123.11 Does SBA require minimize the risk and cost of future
final determination whether it will collateral for any of its disaster loans?
publish the information. disasters. Currently, only two percent of
Section 123.11 defines the conditions
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borrowers utilize mitigation funds. By
FOR FURTHER INFORMATION CONTACT: under which SBA will not require increasing the unsecured threshold, we
Robert Blocker, Office of Financial collateral for disaster loans. Paragraph
Assistance, Office of Capital Access, (a) provides the dollar thresholds below 1 The Cost of Consumer Collateral: Evidence from
Small Business Administration, at which collateral generally will not be Bunching (https://www.fdic.gov/analysis/cfr/
Robert.blocker@sba.gov or (202) 619– required for EIDL loans, physical consumer/2022/papers/collier-paper.pdf). Collier,
0477. Benjamin, et al. The Cost of Consumer Collateral:
disaster home and business loans, and Evidence from Bunching, 2021, https://doi.org/
SUPPLEMENTARY INFORMATION: MREIDL loans. Paragraph (c) defines 10.3386/w29527.
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Federal Register / Vol. 89, No. 142 / Wednesday, July 24, 2024 / Rules and Regulations 59827
expect more borrowers to fully access the process of determining whether an increasing by 2.77–10.7 percentage
the funds available, not only to fully applicant has credit elsewhere by points in each lower credit score tier.3
repair and rebuild, but to build allowing the use of credit score The current regulation requiring
resiliency against future risk. This modeling as a basis of this evaluation of cash flow and disposable
serves as an incentive for borrowers to determination. This change would sync assets has led to approvals of disaster
secure their homes against such impacts the requirement with what is currently loans that are not consistent with
to prevent losses and expedite utilized by non-Federal sources. As a private sector practices, where credit
borrowers’ recoveries from subsequent result of the changes to § 123.104 SBA scores are the primary factor in
disasters. These changes align with determining the interest rate. Our
also is amending § 123.507(c), as it also
SBA’s initiative to increase utilization of analysis of Hurricane Ian business loans
references analyzing cash flow and
the mitigation program from two shows that the average credit score for
disposable assets. loan business principals for loans
percent to twenty percent.
Historically, home loans make up On April 25, 2014, SBA amended its approved for businesses with credit
approximately 80 percent of disaster regulations to allow the use of an elsewhere was 775. In comparison, the
applications in most disasters. The real applicant’s credit score as evidence of average credit score for loans approved
estate collateral associated with these repayment ability, 79 FR 22859. The for businesses without credit elsewhere
loans is primarily the damaged intent of the change was to allow SBA was comparable, at 776. Additionally,
residence of the disaster survivor. Most to expedite the processing of analysis for home loans approved for
disaster home borrowers have one or applications with strong credit by Hurricane Ian shows the average credit
more existing mortgages leaving removing the requirement to analyze score for homeowners without credit
minimal or no equity value for cash flow for all loans. Although the elsewhere was 717. Of those individuals
additional leverage. When SBA requires change allowed SBA to utilize a more determined to have credit elsewhere,
a lien on those assets, the lien is efficient process for determining the average credit score was 784. Of that
subordinate to all existing number, 9.4 percent of those had credit
repayment, there was no coinciding
encumbrances and, often does not add scores of 719 or below.
change to streamline the determination
recoverable value to SBA’s lien position. SBA can use FICO Small Business
The subordinate position significantly of credit elsewhere. Because the current
Scoring Service (SBSS) to determine
reduces recovery for SBA in the event regulation states that credit elsewhere is
credit available elsewhere for business
of a default and foreclosure. Collateral evaluated based on cash flow and loan applicants. The SBSS Score ranges
analysis of SBA loan portfolio from disposable assets, a complete financial from zero to 300 and is calculated based
2018 through 2023, 41 percent of analysis still must be performed for on the business owners’ consumer
disaster survivors who apply for and every applicant even when credit scores credit bureau data, the business’s credit
receive SBA assistance do not have are used as a basis for repayment. To report (e.g., D&B), the business’s
collateral sufficient to fully secure the review a disaster survivor’s disposable financial data, and loan application
loan. Further collateral analysis assets, SBA requires home loan data. Information obtained from
indicates 13 percent of borrowers do not applicants to submit a list of assets; businesscreditreports.com shows SBSS
have adequate equity to secure 20 business principals to submit a personal scores can be divided into ranges as
percent of the loan amount and 7 financial statement; and, in some cases, follows: 4
percent of borrowers have no equity to business and affiliate entities to submit Poor: 1–160, 16% of applicants score
secure the SBA loan. In practice, the complete copies of their Federal tax in this range;
costs of default and foreclosure and the returns. The regulation also requires Fair: 161–190, 29% of applicants
satisfaction of any senior liens on the SBA to review the assets to determine score is this range;
property significantly diminish SBA’s what is disposable. This process is time Good: 191–210, 45% of applicants
recovery. consuming and subjective. score in this range;
This change will expedite Excellent: 211–300, 10% of applicants
disbursement of more funds to SBA has determined that a high credit score in this range.
borrowers and reduce costs to the score is the best indication of whether SBA disaster lending has not
Agency for monitoring liens. Most a disaster survivor could obtain historically used SBSS scores, so there
importantly, it will lower costs (lien financing from non-Federal sources at is no comparable data to show average
recording fees, documentary stamps, reasonable terms. The lending industry SBSS scores for current disaster market
etc.) to the disaster survivors, while uses credit scoring for determining both rate loans compared to below market
ensuring they have adequate recovery whether to approve credit and what rate loans or to show what percentage of
support. Reducing SBA’s costs interest rate to provide the borrower. loans would be at market rate based on
associated with obtaining property Individual credit scores generally range a specific SBSS score. However, SBA
reports necessary to secure collateral from 300 to 835. According to the Fair currently utilizes SBSS scoring for other
and preparing security instruments to Isaacs Corporation (FICO) loan financial assistance programs,
comply with each state will also reduce calculator, borrowers with credit scores specifically as a prescreening process
the need for both additional disaster of 760 and above receive the lowest for 7(a) Small Loans, with a minimum
contracts and surge staffing to process, mortgage interest rates, and interest SBSS score of 155; and Community
disburse, and service secured disaster rates increase by .225 percentage points Advantage loans, with a minimum SBSS
loans. score of 140. The Disaster Loan
in each lower credit score tier.2 In
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Program’s implementation of SBSS
Section 123.104 What interest rate will addition, according to Bankrate, credit
I pay on my home disaster loan? scores of 720 and above receive the 3 Average Personal Loan Interest Rates | Bankrate
The current language of § 123.104 lowest average interest rates on personal (https://www.bankrate.com/loans/personal-loans/
requires SBA to determine whether a loans, with the average interest rates average-personal-loan-rates/).
4 BCR—FICO SBSS—Overview.pdf
disaster survivor has credit elsewhere (businesscreditreports.com) (https://
by analyzing their cash flow and 2 myFICO (www.myfico.com/credit-education/
businesscreditreports.com/documents/BCR%20-
disposable assets. SBA is streamlining calculators/loan-savings-calculator). %20FICO%20SBSS%20-%20Overview.pdf).
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59828 Federal Register / Vol. 89, No. 142 / Wednesday, July 24, 2024 / Rules and Regulations
scores will bring consistency in By permitting the use of credit score as a result of a disaster, as well as
prescreening processes across SBA modeling, SBA is expending the process expediting the processing and
financial programs. The FICO SBSS of determining whether an applicant has disbursement of SBA disaster loans. Due
score is calculated using two main credit elsewhere. This will allow for a to urgent needs for disaster assistance,
factors: personal finance and business quicker approval process because SBA and the noncontroversial nature of these
finance. Personal finance includes will not be restricted to performing a changes, the SBA concludes immediate
factors such as on-time payment history, time-consuming cash flow analysis for action is required to support
types of loan accounts, and your credit each loan. SBA will be able to decrease homeowners, businesses, and their
utilization rate. Business finance the time it takes to process all loan communities as they recover from future
includes factors like the number of applications overall and expedite the disasters.
employees, cash flow, time in business, processing of applications from victims
of disasters. The SBA’s disaster loan Compliance With Executive Orders
and major complaints and lawsuits
unsecured loan threshold has not 12866, 12988, 13132, 13175, 13563,
against your company.
changed in over a decade, even though 14030, 14094, the Paperwork Reduction
SBA’s rule will streamline the Act (44 U.S.C., Ch. 35)),), and the
processing of disaster loans by removing natural disasters are becoming more
severe and frequent across the United Regulatory Flexibility Act (5 U.S.C.
the requirement to evaluate cash flow 601–612)
and disposable assets for all loans. States and its territories, as evidenced
However, SBA may still utilize a review by more longer hurricane seasons and Executive Orders 12866, 13563 and
of cash flow as part of the credit more frequent wildfires, tornados, 14094
elsewhere determination in certain floods, and blizzards. All disasters are
urgent, necessitating the most efficient SBA is issuing this direct final
situations. For example, when an rulemaking in conformance with
applicant has a high credit score but and effective path to assistance for
survivors. In short, an increase in the Executive Orders 12866, 13563, and
large disaster losses, SBA may evaluate 14094. Executive Orders 12866 and
cash flow to determine if the cost of SBA’s disaster unsecured threshold is
necessary to meet the current economic 13563 direct agencies to assess all costs
obtaining disaster financing from non- and benefits of available regulatory
Federal sources would present a demands of more severe and frequent
disasters. alternatives and, if regulation is
hardship to the disaster survivor. necessary, to select regulatory
SBA does not anticipate receiving
The regulatory changes would allow significant adverse comments because approaches that maximize net benefits
SBA to automate and streamline more the principal effect of these (including potential economic,
loan processes. Utilizing credit scores to amendments is to reduce delays in loan environmental, public health and safety
determine credit elsewhere also allows processing and provide faster assistance. effects, distributive impacts, and
SBA to provide greater clarity to disaster Also, SBA will be able to increase the equity). Executive Order 13563
survivors regarding interest rate amount disaster survivors can borrow emphasizes the importance of
determinations. Furthermore, through the SBA’s Disaster Assistance quantifying both costs and benefits,
determining credit elsewhere by using Loan Program while reducing the reducing costs, harmonizing rules, and
credit scores would make the process burdens of pledging collateral to the promoting flexibility. Executive Order
easily adaptable. If a score leads to a disaster survivors, such as having to 14094 reaffirms, supplements, and
large increase or decrease in the provide the additional documentation updates Executive Order 12866 and
percentage of disaster survivors showing required for a secured loan amount and further directs agencies to solicit and
credit elsewhere, the score can be incurring costs associated with lien consider input from a wide range of
adjusted, which would directly impact recording fees, title company fees, etc. affected and interested parties through a
the percentage. Unsecured loans require minimal variety of means. The Office of
III. Justification for Direct Final Rule documentation, such as an executed Management and Budget has
Note and Loan Authorization and determined that this rule does not
Agencies typically utilize direct final Agreement. Because there is less constitute a significant regulatory action
rulemakings for non-controversial documentation to collect and review, under Executive Order 12866, as
regulatory actions that are unlikely to the SBA can disburse funds below the amended by Executive Order 14094.
receive adverse comments. In direct unsecured loan threshold much more SBA has developed this rule in a
final rulemaking, an agency publishes a quickly. SBA’s disaster loan program manner consistent with these
final rule with a statement that the rule offers long-term, low interest, fixed rate requirements and thoroughly examined
will go into effect unless the agency loans to disaster survivors, enabling the costs and benefits as well as
receives significant adverse comment them to replace real or personal availability of regulatory alternatives
within a specified period. Significant property damaged or destroyed in associated with its implementation;
adverse comments are comments that declared disasters. It also offers such therefore, SBA has drafted an analysis
provide strong justifications why the loans to affected small businesses and for the public’s information below.
rule should not be adopted or for non-profits to help them recover from
changing the rule. If the agency receives A. Objectives of the Rule
economic injury caused by such
no significant adverse comment in disasters. This rule amends regulations
response to the direct final rule, the rule The changes in this direct final rule governing the SBA Disaster Loan
goes into effect. If the agency receives will not require members of the public Program by revising the Credit
significant adverse comment, the agency Elsewhere Test (CET) to allow credit
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to adjust their behavior. Rather, the
withdraws the direct final rule and may changes will benefit the public by score modeling in order to streamline
instead issue a proposed rulemaking. allowing for increased compensation disaster loan processing. Additionally,
SBA has determined that the regulatory before collateral is required to the rule increases the unsecured loan
changes addressed in this direct final adequately reflect increases in costs threshold from $25,000 to $50,000 for
rulemaking are non-controversial, and associated with replacing and repairing EIDL loans for all disasters and for
not likely to result in adverse residential real property and household physical home and business loans for
comments. effects that have been lost or damaged Major Disaster declarations. The revised
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Federal Register / Vol. 89, No. 142 / Wednesday, July 24, 2024 / Rules and Regulations 59829
CET streamlines loan processing, has noted that loans without collateral revising internal policies, procedures,
including interest rate determination, requirements are generally fully funded and training.
making these Disaster Loan Program in a single disbursement while secured The largest source of potential costs
practices more consistent with lending loans have usually required multiple for SBA may result from the increase in
sector practices. SBA recognizes the disbursements. SBA expects a loans without collateral following the
increased severity of financial significant reduction in the time increase in the collateral threshold in
consequences from disasters and, in required for full disbursement of loan § 123.11. With this change, SBA
response, is increasing the threshold for proceeds for the great majority of estimates from its experience with loans
the collateral requirement. Evidence disaster borrower by increasing the after Hurricane Ian that 70.98 percent of
suggests that the collateral requirement secured loan limit, along with other home loans would be unsecured, an
has been an impediment to access of program improvements within the ULP, increase from the current unsecured
financial resources for disaster recovery resulting in major benefits to borrowers. home loan portfolio from Hurricane Ian
for households by limiting disaster loan A faster disbursement of the loans of 55.3 percent. Based on historical data,
amounts. SBA expects that lending further enhances the restorative work of this increase in unsecured loans may
shortfalls will become greater with these loans to homes and businesses. lead to more defaults, necessitating a
increased severity of financial The adjustment of the collateral higher subsidy rate. The Agency notes
consequences from disasters. threshold and revision of the CET the cost savings from the new CET will
decreases the burden on borrowers to offset at least some of this cost and with
B. Benefits of the Rule provide documentation that SBA must the additional cost savings from the
Revision of the Credit Elsewhere Test verify, resulting in savings in disaster ULP, SBA expects a decrease in the
(CET) and the introduction of the staffing and training. The Agency overall costs of the disaster loan
Agency’s Unified Lending Platform expects that with the higher collateral program. In the event of default, SBA
(ULP), a new processing system, will threshold, the number of loans requiring does expect an impact on the recovery
streamline SBA disaster lending. The collateral at original approval will rates from reduced collections from
benefit of the revised CET for the decrease from 46.4 percent to 31 percent collateral liquidations, but this is in part
Agency and borrowers is clarity of of approved disaster loans. SBA limited even under current regulations
evaluation for loan eligibility and estimates the decrease in loan because these disaster loans have been
interest rate determination, increased processing costs with the increased and will continue to be subordinated to
program efficiency, and reduction of collateral threshold is $20.33 per loan, existing mortgages.
uncertainty in the process. Revised CET generating $203,300 in savings to the To consider the impact of increased
integrated within the ULP will reduce Agency for every 10,000 approved unsecured loan limits, SBA analyzed
the hiring of temporary personnel in the loans. Another example of cost savings the activity from Hurricane Ian, a
Disaster Loan Program for each separate is the reduction in property and vesting powerful Category 5 hurricane which
disaster lending period. SBA expects the reports and other information for made landfall on the west coast of
government to benefit from the cost recording of liens, for which SBA Florida on September 28, 2022, and
savings enabled by a reduced need for currently contracts with a third-party again in the Carolinas on September 30,
temporary lending personnel with the vendor. A vesting report costs about $25 2022. Ian was responsible for 155
revised CET within the ULP. per property, so a decrease from 46.4 fatalities in the United States and
SBA undertook the increase in the percent to 31 percent of loans requiring caused an estimated $113 billion dollars
collateral threshold in response to this report reduces this particular in damages.
evidence that shows an increase in expense by $38,500 for every 10,000 SBA’s analysis of Hurricane Ian
financial well-being for disaster loan approved loans.6 suggests that if the unsecured home loan
borrowers,5 and also addresses a limit of $50,000 had been in place,
reluctance to enter into a loan C. Costs of the Rule 9,286 of the 13,083 home loans from
agreement with SBA that would involve Assessment of costs in this impact Hurricane Ian could be unsecured
a lien on property. The collateral analysis includes those borne by compared to the 7,235 that were at the
threshold revision increases the borrowers and by the Agency. Excluding unsecured threshold or less for that
availability of the benefits of SBA’s initial procurement costs of the ULP,7 disaster. This represents an overall
disaster lending. Noteworthy is that learning the new application system percentage increase of 15.68%. The
home loans generally make up 80 with ULP is the initial cost for increase in the unsecured portfolio for
percent of disaster loan applicants. borrowers and for SBA. However, any Ian home loans would be 35.50% of the
The increased threshold for collateral loan application involves an application dollar value compared to the actual
is consistent with increased ability to and as the revised system is expected to 22.73% value of the active Ian portfolio.
work within the Agency’s statutory be more streamlined, SBA expects this A similar percentage increase to the
authorization in Section 7(b) of the burden to applicants to be lower than active home loan portfolio would
Small Business Act to make loans to under the system it is to replace. SBA increase the unsecured portion of home
individuals and entities that have been expects the reduction in application disaster loans by $81,466,615, which is
adversely affected by disasters. SBA processing and portfolio management small when compared to the $7.2
believes that its current collateral costs will outweigh costs of billion-dollar active home loan
requirements are an impediment to familiarization with the new system portfolio.
increasingly expensive rebuilding At an estimated subsidy rate of 19bps
plus any costs of developing and
efforts, by increasing the collateral
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and a five-year average loan amount of
threshold SBA will shorten loan cycle 6 10,000 × (.464¥.31) × $25 = $38,500. $39,300 for loans impacted by the
time for approved loans. The Agency 7 SBA’s acquisition of ULP is independent of a collateral change, the estimated effect
change in the collateral threshold. The procurement on the subsidy for each increase of
5 Collier, Ben and Ben Keys, SBA-Wharton cost is therefore not a cost of CET or the increased 10,000 unsecured loans is $746,700.
Partnership: Update on Findings, March 2023 threshold. The learning and familiarization costs
found a statistically significant reduction in are not entirely attributable to CET or the increased
The following table represents
bankruptcies among disaster loan borrowers in the threshold, as ULP will be the platform for SBA’s Hurricane Ian home loans Secured vs
years following a disaster. loan programs. Unsecured if the unsecured limit was
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59830 Federal Register / Vol. 89, No. 142 / Wednesday, July 24, 2024 / Rules and Regulations
$50,000 as a percentage of the active
home loan portfolio and in dollars.
HURRICANE IAN HOME LOANS
Percentage of Percentage of
Number of Total
Loan amounts number of total value of
active loans loan value
home loans home loans
0–$50,000 ........................................................................................ 9,286 70.98 $226,545,460 35.50
>$50,000 .......................................................................................... 3,797 29.02 411,660,300 64.5
Total .......................................................................................... 13,083 100 638,205,760 100
HURRICANE IAN BUSINESS LOANS
Percentage of Percentage of
Number of Total
Loan amounts number of total value of
active loans loan value
business loans business loans
0–$50,000 ........................................................................................ 1,099 55.76 $26,308,000 8.93
>$50,000 .......................................................................................... 872 44.24 268,687,200 91.07
Total .......................................................................................... 1,971 100 294,695,200 100
The table of Hurricane Ian business D. Alternatives 3(b)(2) of Executive Order 12988, Civil
loans shows that 1,099 of the business The rule includes increasing the Justice Reform, to minimize litigation,
loans for Ian would have been unsecured loan thresholds for physical eliminate ambiguity, and reduce
unsecured if the limit was $50,000 and EIDL loans from current levels. The burden. The action does not have
compared to the 828 approved for alternative may be to modify the preemptive effect or retroactive effect.
$25,000 or less for that disaster. This increases at a lower or higher amount.
represents an overall percentage Executive Order 13132
By providing updates and adjustments
increase of 13.75%. The increase in the in unsecured loan amounts, including This rule does not have federalism
total loan amounts in the unsecured aggregation of loans to one borrower, the implications as defined in Executive
portfolio for Ian business loans would Agency has optimized the disaster Order 13132. It will not have substantial
be 8.93% compared to the 5.34% for survivors’ options for recovery on more direct effects on the States, on the
this disaster. The dollar figure of reasonable and equitable terms. SBA has relationship between the National
unsecured business loans for Ian would determined that the increase to $50,000 Government and the States, or on the
only increase by $10,557,300 or only for unsecured disaster loans and the distribution of power and
3.6% of the Ian business portfolio. A corresponding changes to the loan responsibilities among the various
similar comparison to the current active aggregation rules for a single borrower is levels of government, as specified in the
portfolio finds that 3.6% would only be the appropriate action. The Agency did Executive order. As such it does not
$67,696,547 of the current not consider any alternative to the new warrant the preparation of a Federalism
$1,880,459,649 disaster business loan CET, which brings consistency with Assessment.
portfolio. general lending practices to the loan
Based on SBA’s analysis, the Agency Executive Order 13175
program and facilitates the
determined that the changes enhance implementation of ULP, which is an This rule does not have tribal
the efficiency of the administration and Agency priority. implications under Executive Order
delivery of the Disaster Loan Program. For each 10,000 loans, the rule 13175, Consultation and Coordination
For example, SBA anticipates increasing generates savings to the Agency of with Native American Tribal
the unsecured threshold will allow SBA $203,300 from reduced processing costs Governments, because it does not have
to disburse the majority of approved and $38,500 from elimination of the a substantial direct effect on one or
disaster loans within seven days of recording of liens, for quantifiable more Native American Tribes, on the
approval. Moreover, SBA anticipates the savings of $241,500 on each 10,000 relationship between the Federal
changes will have minimal impact on unsecured loans. These quantifiable Government and Native American
the overall cost of the Disaster Loan benefits are balanced against an Tribes, or on the distribution of power
Program. Additionally, SBA expects the estimated subsidy impact of $746,700 and responsibilities between the Federal
changes may motivate borrowers to for each 10,000 unsecured loans. Government and Native American
make use of the disaster loan mitigation Additionally, SBA expects the changes Tribes.
program, thereby reducing the extent of in the rule to make the disaster loans
damages caused by future disasters. Executive Order 14030
more widely available, which will
Furthermore, the changes aim to ensure SBA was tasked with developing
ddrumheller on DSK120RN23PROD with RULES1
generate additional benefits to the
fair and equal access to disaster borrowers and their communities, recommendations for improving how
assistance in underserved communities further balancing the benefits against Federal financial management and
that may lack access to other sources of the costs. reporting can incorporate climate-
capital, requiring these borrowers to related financial risk, especially as that
pledge collateral to SBA rather than Executive Order 12988 risk relates to Federal lending programs.
forgoing collateral lien and seeking This action meets applicable The SBA Disaster Loan Program
other sources of affordable capital. standards set forth in sections 3(a) and contains eligibility and additional loan
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Federal Register / Vol. 89, No. 142 / Wednesday, July 24, 2024 / Rules and Regulations 59831
funds for mitigation measures that allow when—among other exceptions—the § 123.104 What interest rate will I pay on
physical disaster loan recipients to agency for good cause finds that notice my home disaster loan?
obtain additional funds to install and public procedure are impracticable, If you can obtain credit elsewhere,
mitigating measures to protect homes unnecessary, or contrary to the public your interest rate is set by a statutory
and businesses and reduce future interest. SBA Office of Advocacy Guide: formula, but will not exceed eight (8)
property damage. How to Comply with the Regulatory percent per annum. If you cannot obtain
Currently, only two percent of Flexibility Act, Ch.1. p.9. Since this rule credit elsewhere, your interest rate is
borrowers apply for mitigation funds. is exempt from notice and comment, one-half the statutory rate, but will not
Increasing the unsecured threshold will SBA is not required to conduct a exceed four (4) percent per annum.
encourage borrowers not only to make regulatory flexibility analysis. Generally, credit elsewhere means that
full use of funds available to complete SBA believes you could obtain
not just repairs, but to also to access List of Subjects in 13 CFR Part 123
financing from non-Federal sources on
funds to mitigate future loss from Disaster assistance, Loan programs— reasonable terms subsequent to the
subsequent disasters. This increases business, Small businesses. declaration of a disaster. SBA may
survivors’ recovery and resiliency include the use of credit score to make
against future disasters and achieves the For the reasons set forth in the this determination. If you cannot obtain
Agency’s goal to increase the mitigation preamble, the SBA amends 13 CFR part credit elsewhere, you also may be able
program utilization from two percent to 123 as follows: to borrow from SBA to refinance
20 percent. existing recorded liens against your
PART 123—DISASTER LOAN
Paperwork Reduction Act, 44 U.S.C. Ch. PROGRAM damaged real property.
35 ■ 4. Amend § 123.507 by revising
■ 1. The authority citation for part 123 paragraph (c) to read as follows:
SBA has determined that this final
rule does not impose additional continues to read as follows: § 123.507 Under what circumstances will
reporting or recordkeeping requirements Authority: 15 U.S.C. 632, 634(b)(6), 636(b), SBA consider waiving the $2 million loan
under the Paperwork Reduction Act, 44 636(d), 657n, and 9009. limit?
U.S.C., Chapter 35. * * * * *
■ 2. Amend § 123.11 by revising
Congressional Review Act, 5 U.S.C. Ch. (c) Your small business has used all
paragraphs (a)(1) and (2) and (c) to read
8 reasonably available funds from the
as follows:
small business, its affiliates, its
Subtitle E of the Small Business principal owners and all available credit
§ 123.11 Does SBA require collateral for
Regulatory Enforcement Fairness Act of any of its disaster loans? elsewhere (as described in § 123.104) to
1996, also known as the Congressional alleviate the small business’ economic
Review Act or CRA, generally provides (a) * * *
injury.
that before a rule may take effect, the (1) Economic injury disaster loans.
agency promulgating the rule must SBA generally will not require the Isabella Casillas Guzman,
submit a rule report, which includes a borrower to pledge collateral to secure Administrator.
copy of the rule, to each House of the an economic injury disaster loan of [FR Doc. 2024–16207 Filed 7–23–24; 8:45 am]
Congress and to the Comptroller General $50,000 or less. BILLING CODE 8026–09–P
of the United States. SBA will submit a (2) Physical disaster home and
report containing this rule and other physical disaster business loans. (i) For
required information to the U.S. Senate, Major Disasters declared under DEPARTMENT OF TRANSPORTATION
the U.S. House of Representatives, and § 123.3(a)(1) or (2), SBA generally will
the Comptroller General of the United not require the borrower to pledge Federal Aviation Administration
States. A major rule under the CRA collateral to secure a physical disaster
cannot take effect until 60 days after it home or physical disaster business loan 14 CFR Part 71
is published in the Federal Register. of $50,000 or less.
The Office of Information and [Docket No. FAA–2024–1392; Airspace
Regulatory Affairs has determined that (ii) For SBA-declared disasters under Docket No. 24–ASW–11]
this rule is not a ‘‘major rule’’ as defined § 123.3(a)(3) or (6), SBA generally will
RIN 2120–AA66
by 5 U.S.C. 804(2). Therefore, this rule not require the borrower to pledge
is not subject to the 60-day restriction. collateral to secure a physical disaster Establishment of Class E Airspace;
home or physical disaster business loan Brenham, TX
Regulatory Flexibility Act, 5 U.S.C. 601– of $14,000 or less.
612 * * * * * AGENCY: Federal Aviation
The Regulatory Flexibility Act (RFA), Administration (FAA), DOT.
(c) Sometimes a borrower, including
5 U.S.C. 601–612, generally requires affiliates as defined in part 121 of this ACTION: Final rule.
that when an agency issues a proposed title, will have more than one loan after
rule, or a final rule pursuant to section SUMMARY: This action establishes Class
a single disaster. In deciding whether
553(b) of the APA or another law, the E airspace at Brenham, TX. The FAA is
collateral is required, SBA will add up
agency must prepare a regulatory taking this action to support new public
all physical disaster loans to see if they
instrument procedures.
ddrumheller on DSK120RN23PROD with RULES1
flexibility analysis that meets the exceed the applicable unsecured
requirements of the RFA and publish threshold outlined in paragraph (a)(2) of DATES: Effective date 0901 UTC, October
such analysis in the Federal Register. 5 this section and all economic injury 31, 2024. The Director of the Federal
U.S.C. 603, 604. disaster loans to see if they exceed Register approves this incorporation by
Rules that are exempt from notice and $50,000. reference action under 1 CFR part 51,
comment are also exempt from the RFA subject to the annual revision of FAA
* * * * *
requirements, including conducting a Order JO 7400.11 and publication of
regulatory flexibility analysis, such as ■ 3. Revise § 123.104 to read as follows: conforming amendments.
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- www.govinfo.gov