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1 II Federal Register / Vol. 65, No. 211 / Tuesday, October 31, 2000
The FEDERAL REGISTER is published daily, Monday through SUBSCRIPTIONS AND COPIES Friday, except official holidays, by the Office of the Federal Register, National Archives and Records Administration, PUBLIC Washington, DC 20408, under the Federal Register Act (44 U.S.C. Subscriptions: Ch. 15) and the regulations of the Administrative Committee of Paper or fiche 202–512–1800 the Federal Register (1 CFR Ch. I). The Superintendent of Assistance with public subscriptions 512–1806 Documents, U.S. Government Printing Office, Washington, DC 20402 is the exclusive distributor of the official edition. General online information 202–512–1530; 1–888–293–6498 Single copies/back copies: The Federal Register provides a uniform system for making available to the public regulations and legal notices issued by Paper or fiche 512–1800 Federal agencies. 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2 III
Contents Federal Register Vol. 65, No. 211
Tuesday, October 31, 2000
Agency for International Development Education Department NOTICES NOTICES Agency information collection activities: Agency information collection activities: Proposed collection; comment request, 64926 Proposed collection; comment request, 64933 Submission for OMB review; comment request, 64933– Agency for Toxic Substances and Disease Registry 64934 NOTICES Meetings: Employment and Training Administration Public Health Service Activities and Research at DOE NOTICES Sites Citizens Advisory Committee, 64953–64954 Grants and cooperative agreements; availability, etc.: Incumbent/dislocated worker skill shortage II demonstration program, 64991–65007 Arts and Humanities, National Foundation See National Foundation on the Arts and the Humanities Energy Department See Federal Energy Regulatory Commission Centers for Disease Control and Prevention NOTICES NOTICES Reports and guidance documents; availability, etc.: Reports and guidance documents; availability, etc.: Environmental cleanup program at sites; long-term Human immunodeficiency virus (HIV)— stewardship study, 64934–64935 HIV counseling, testing, and referral guidelines; comment request, 65241–65242 Environmental Protection Agency HIV screening of pregnant women, recommendations; PROPOSED RULES guidelines; comment request, 65241–65243 Air quality implementation plans; approval and promulgation; various States: Coast Guard Texas, 64914–64919 NOTICES RULES Drawbridge operations: Pesticides; emergency exemptions, etc.: New York, 64891–64892 Aventis CropScience; StarLink corn Cry9 Bt corn plant pesticide; scientific information assessment, 65245– 65251 Commerce Department Toxic and hazardous substances control: See International Trade Administration Interagency Testing Committee report; receipt and See National Oceanic and Atmospheric Administration comment request, 65233–65240 NOTICES Monomer acid and derivatives; chemical nomenclature Committees; establishment, renewal, termination, etc.: correction, 64944–64948 Manufacturing Extension Partnership National Advisory Board, 64926 Executive Office of the President See Management and Budget Office Commodity Futures Trading Commission See Trade Representative, Office of United States PROPOSED RULES Commodity Exchange Act: Federal Aviation Administration Futures commission merchants; daily computation of PROPOSED RULES amount of customer funds required to be segregated; Airworthiness directives: amendments, 64904–64906 Airbus, 64901–64904 Bombardier, 64898–64901 Comptroller of the Currency NOTICES NOTICES Meetings: Strategic plan, 65039 RTCA, Inc., 65038 Federal Communications Commission Customs Service RULES NOTICES Common carrier services: Customhouse broker license cancellation, suspension, etc.: National Exchange Carrier Association, Inc.; access tariffs Goldberg, Scott J., et al., 65039–65040 participation changes; notice period shortened, United Motor Freight, Inc., et al., 65040 64892–64894 Meetings: PROPOSED RULES 2000 Trade Symposium, 65040 Radio stations; table of assignments: Arizona, 64924 Defense Department Various States, 64924–64925 NOTICES NOTICES Federal Acquisition Regulation (FAR): Meetings: Reverse auctioning, 65231–65232 Technological Advisory Council, 64948–64949
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Federal Deposit Insurance Corporation Federal Acquisition Regulation (FAR): RULES Reverse auctioning, 65231–65232 Practice and procedure: Privacy Act: Civil monetary penalties; inflation adjustment, 64884– Systems of records, 64952–64953 64887 Health and Human Services Department Federal Energy Regulatory Commission See Agency for Toxic Substances and Disease Registry NOTICES See Centers for Disease Control and Prevention Electric rate and corporate regulation filings: See Food and Drug Administration Kentucky Utilities Co. et al., 64939–64941 See Health Care Financing Administration Environmental statements; notice of intent: See National Institutes of Health William Gas Pipelines Central, Inc., 64941–64943 NOTICES Hydroelectric applications, 64943–64944 Agency information collection activities: Applications, hearings, determinations, etc.: Proposed collection; comment request, 64953 Algonquin Gas Transmission Co., 64935–64936 ANR Pipeline Co., 64936 Health Care Financing Administration El Paso Natural Gas Co., 64936 PROPOSED RULES FPL Energy Cape, LLC, 64936–64937 Medicaid: Granite State Gas Transmission, Inc., 64937 Federal financial participation limits, 64919–64924 GridFlorida LLC et al., 64937 NOTICES Natural Gas Pipeline Co. of America, 64937 Medicare: Nicole Energy Marketing of Illinois, Inc., 64938 Fiscal intermediaries and carriers; criteria and standards Northwest Pipeline Corp., 64938 for evaluating performance (2001 FY), 64968–64974 Tennessee Gas Pipeline Co., 64938 Medicare, Medicaid, and CLIA programs: COLA approval as CLIA accreditation organization; Federal Reserve System continuance, 64966–64968 NOTICES Banks and bank holding companies: Housing and Urban Development Department Formations, acquisitions, and mergers, 64949 RULES Permissible nonbanking activities, 64949–64950 Federal National Mortgage Association (Fannie Mae) and Meetings; Sunshine Act, 64950 Federal Home Loan Mortgage Corporation (Freddie Mac): Federal Trade Commission New housing goals for 2000-2003 calendar years, 65043– NOTICES 65229 Organization, functions, and authority delegations: NOTICES Planning and Information Division, Associate Director, Agency information collection activities: 64950 Proposed collection; comment request, 64980–64981 Prohibited trade practices: Submission for OMB review; comment request, 64981 WebTV Networks, Inc., 64950–64951 Organization, functions, and authority delegations: Enforcement Center Director, 64981–64982 Financial Management Service See Fiscal Service Immigration and Naturalization Service NOTICES Fiscal Service Agency information collection activities: NOTICES Proposed collection; comment request, 64987–64990 Federal debt collection and discount evaluation; Treasury current value of funds rate, 65040–65041 Interior Department See Fish and Wildlife Service Fish and Wildlife Service See Land Management Bureau NOTICES See National Park Service Natural resource damage assessment plans; availability, See Surface Mining Reclamation and Enforcement Office etc.: Lower Fox River/Green Bay, WI, 64982 Internal Revenue Service RULES Food and Drug Administration Income taxes: NOTICES Partnership debt allocation, 64888–64890 Animal drugs, feeds, and related products: NOTICES Enrofloxacin for poultry; proposal to withdraw approval; Agency information collection activities: hearing, 64954–64965 Proposed collection; comment request, 65041 Committees; establishment, renewal, termination, etc.: Meetings: Gastrointestinal Drugs Advisory Committee et al., 64965– Information Reporting Program Advisory Committee, 64966 65041–65042
General Services Administration International Trade Administration NOTICES NOTICES Acquisition regulations: Antidumping: Electrostatic Sensitive Devices (Label) (OF 87A); form Cut-to-length carbon steel plate from— cancellation, 64951–64952 Canada, 64926–64932
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International Trade Commission National Institute of Allergy and Infectious Diseases, NOTICES 64976–64977 Meetings; Sunshine Act, 64987 National Institute of Diabetes and Digestive and Kidney Diseases, 64976 Justice Department Scientific Review Center, 64977–64980 See Immigration and Naturalization Service Patent licenses; non-exclusive, exclusive, or partially See Justice Programs Office exclusive: Amylin Pharmaceuticals, Inc.; correction, 64980 Justice Programs Office NOTICES National Oceanic and Atmospheric Administration Environmental statements; availability, etc.: RULES Methamphetamine Law Enforcement Program, 64990– Fishery conservation and management: 64991 Alaska; fisheries of Exclusive Economic Zone— Bering Sea and Aleutian Islands groundfish; correction, Labor Department 64895–64896 See Employment and Training Administration Atlantic coastal fisheries cooperative management— See Occupational Safety and Health Administration Horseshoe crab; cancellation of Federal moratorium on See Pension and Welfare Benefits Administration Virginia, 64896–64897 NOTICES Northeastern United States Fisheries— Agency information collection activities: Spiny dogfish, 64894–64895 Submission for OMB review; comment request, 64991 NOTICES Land Management Bureau Meetings: NOTICES Western Pacific Fishery Management Council, 64932 Coal leases, exploration licenses, etc.: Permits: Utah, 64982–64983 Marine mammals, 64932–64933 Meetings: National Park Service Resource Advisory Councils— NOTICES Front Range, 64983–64984 Agency information collection activities: Survey plat filings: Proposed collection; comment request, 64984–64985 Idaho, 64984 Environmental statements; availability, etc.: Management and Budget Office Petrified Forest National Park, AZ, 64985 NOTICES Yellowstone and Grand Teton National Parks and John D. Hospital and medical care and treatment furnished by Rockefeller, Jr., Memorial Parkway, WY and MT, United States, costs; rates regarding recovery from 64986 tortiously liable third persons (Circular A-25), 65024– Meetings: 65032 National Park System Advisory Board, 64986–64987 Maritime Administration Nuclear Regulatory Commission NOTICES NOTICES Coastwise trade laws; administrative waivers: Meetings; Sunshine Act, 65017–65018 MACCOBOY III, 65038–65039 Post Accident Sampling System; license amendment applications; model safety evaluation, etc., 65018– National Aeronautics and Space Administration 65024 NOTICES Regulatory guides; issuance, availability, and withdrawal, Federal Acquisition Regulation (FAR): 65024 Reverse auctioning, 65231–65232 Occupational Safety and Health Administration National Archives and Records Administration NOTICES NOTICES Agency information collection activities: Services for persons with limited English proficiency; Proposed collection; comment request, 65008–65011 comment request, 65016–65017 Office of Management and Budget National Foundation on the Arts and the Humanities See Management and Budget Office NOTICES Meetings: Office of United States Trade Representative Combined Arts Advisory Panel, 65017 See Trade Representative, Office of United States
National Institutes of Health Pension and Welfare Benefits Administration NOTICES NOTICES Inventions, Government-owned; availability for licensing, Employee benefit plans; prohibited transaction exemptions: 64974 Care Services Employees et al., 65011–65016 Meetings: Director’s Council of Public Representatives, 64974– Public Debt Bureau 64975 See Fiscal Service National Cancer Institute, 64975–64976 National Center for Complementary and Alternative Public Health Service Medicine, 64976 See Agency for Toxic Substances and Disease Registry
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See Centers for Disease Control and Prevention Treasury Department See Food and Drug Administration See Comptroller of the Currency See National Institutes of Health See Customs Service See Fiscal Service Securities and Exchange Commission See Internal Revenue Service NOTICES Meetings; Sunshine Act, 65034 Veterans Affairs Department Self-regulatory organizations; proposed rule changes: NOTICES American Stock Exchange LLC, 65034–65037 Meetings: Applications, hearings, determinations, etc.: National Research Advisory Council, 65042 CyberSentry, Inc., 65032 Public utility holding company filings, 65033–65034 Special Counsel Office Separate Parts In This Issue RULES Prohibited personnel practice or other prohibited activity; Part II complaints and information disclosures filing, 64881– Department of Housing and Urban Development, 65043– 64884 65229 Surface Mining Reclamation and Enforcement Office Part III PROPOSED RULES Department of Defense, General Services Administration, Permanent program and abandoned mine land reclamation National Aeronautics and Space Administration, plan submissions: 65231–65232 Missouri, 64906–64914 Toxic Substances and Disease Registry Agency Part IV See Agency for Toxic Substances and Disease Registry Environmental Protection Agency, 65233–65240
Trade Representative, Office of United States Part V NOTICES Department of Health and Human Services, Centers for Meetings: Disease Control, 65241–65243 Customs Matters Industry Functional Advisory Committee, 65037 Part VI Reports and guidance documents; availability, etc.: Environmental Protection Agency, 65245–65251 Foreign Trade Barriers; National Trade Estimate Report; comment request, 65037–65038 Transportation Department Reader Aids See Coast Guard Consult the Reader Aids section at the end of this issue for See Federal Aviation Administration phone numbers, online resources, finding aids, reminders, See Maritime Administration and notice of recently enacted public laws.
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CFR PARTS AFFECTED IN THIS ISSUE
A cumulative list of the parts affected this month can be found in the Reader Aids section at the end of this issue.
5 CFR 1800...... 64881 12 CFR 308...... 64884 14 CFR Proposed Rules: 39 (2 documents) ...... 64898, 64901 17 CFR Proposed Rules: 1...... 64901 24 CFR 81...... 65044 26 CFR 1...... 64888 30 CFR Proposed Rules: 925...... 64906 33 CFR 117...... 64891 40 CFR Proposed Rules: 52...... 64914 42 CFR Proposed Rules: 435...... 64919 47 CFR 69...... 64892 Proposed Rules: 73 (2 documents) ...... 64923, 64924 50 CFR 648...... 64894 679...... 64895 697...... 64896
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Rules and Regulations Federal Register Vol. 65, No. 211
Tuesday, October 31, 2000
This section of the FEDERAL REGISTER SUPPLEMENTARY INFORMATION: complaints (other than Hatch Act contains regulatory documents having general allegations) in formats other than Form I. Rulemaking History applicability and legal effect, most of which OSC–11. Under the revision of § 1800.1, are keyed to and codified in the Code of On August 16, 2000, OSC published if a person uses a format other than the Federal Regulations, which is published under for comment a proposed rule revising 50 titles pursuant to 44 U.S.C. 1510. required OSC form to file a complaint agency regulations at 5 CFR part 1800. (other than a Hatch Act allegation), the The Code of Federal Regulations is sold by See 65 FR 49949. OSC issued the material submitted will be returned to the Superintendent of Documents. Prices of proposed rule pursuant to 5 U.S.C. the filer with a blank Form OSC–11 to new books are listed in the first FEDERAL 1212(e), which authorizes the Special fill out and return to OSC. Processing of REGISTER issue of each week. Counsel to prescribe and publish such the complaint will begin upon OSC’s regulations as may be necessary to receipt of the completed Form OSC–11. perform the functions of the office. OFFICE OF SPECIAL COUNSEL A brief outline of the purposes for (4) To revise and update descriptions which OSC has revised part 1800 of information needed by OSC to 5 CFR Part 1800 follows: process both complaints alleging Hatch (1) To provide basic information Act violations and whistleblower RIN 3255±ZA00 about OSC jurisdiction over complaints disclosures. OSC will continue to permit of improper employment practices and filers of complaints alleging Hatch Act Filing Complaints of Prohibited whistleblower disclosures. Sections violations, and filers of whistleblower Personnel Practice or Other Prohibited 1800.1 and 1800.2 currently outline disclosures, to submit such matters to Activity; Filing Disclosures of procedures for filing complaints and OSC in any written format, including Information disclosures with OSC, with no reference OSC’s complaint and disclosure forms to its basic jurisdiction. The revision of (Forms OSC–11 and OSC–12, AGENCY: Office of Special Counsel. Part 1800 outlines matters within OSC’s respectively). Sections 1800.1 and jurisdiction under each section as an aid 1800.2 currently describe information ACTION: Final rule. to persons considering filing a needed by OSC to review and evaluate complaint or disclosure. complaints and disclosures. The (2) To implement a requirement that SUMMARY: The Office of Special Counsel revision of § 1800.1 tailors the complaint filers use an OSC complaint (OSC) is issuing a final rule amending description to Hatch Act allegations, for form to submit allegations of improper its regulations at 5 CFR part 1800 to: filers who submit them in formats other provide basic information about OSC employment practices (other than alleged Hatch Act violations). Most than an OSC complaint form. The jurisdiction over complaints of revision of § 1800.2 updates the improper employment practices, and complaints received by OSC consist of allegations of improper employment description of information needed in over disclosures of information of whistleblower disclosures to OSC, for wrongdoing in federal agencies (also practices other than Hatch Act violations. Section 1800.1, at paragraphs filers who submit them in a format other known as ‘‘whistleblower disclosures’’); than the OSC disclosure form. implement a requirement that complaint (b)(1)–(6), currently outlines the types of filers use an OSC form to submit information that should be provided in (5) To update contact information for allegations of improper employment a complaint, and indicates that sending complaints and disclosures to practices (other than alleged Hatch Act complaints can be submitted in any OSC, and for obtaining OSC complaint written format. Given this latitude, there violations); outline procedures to be and disclosure forms. Since OSC’s have been considerable disparities in followed by OSC when filers submit current regulations were published, its the way complaint information is complaints (other than Hatch Act mailing address for complaints and presented to OSC. Mandatory use of the disclosures has changed, and a Web site, allegations) in formats other than an revised Form OSC–11, rather than any OSC complaint form; revise and update at which many OSC forms and written format chosen by a complaint publications are available to the public, descriptions of information needed by filer, will help: (a) Enable complainants OSC to process both complaints alleging has been established. The revision of to obtain useful information about OSC §§ 1800.1 and 1800.2 updates both Hatch Act violations and whistleblower jurisdiction and procedures before filing disclosures; and update contact sections with current mailing and Web the complaint; (b) produce more site address information. information for sending complaints and complete and consistent presentations disclosures to OSC, and for obtaining of facts needed by OSC to review, follow Following OSC’s publication of the OSC complaint and disclosure forms. up on, and investigate complaints of notice of proposed rulemaking, the Office of Management and Budget DATES: This rule is effective on improper employment practices; and (c) (OMB) approved a revised complaint December 1, 2000. make more efficient use of OSC’s limited resources, by reducing the time form (Form OSC–11), along with a FOR FURTHER INFORMATION CONTACT: spent by staff in answering threshold revised form for whistleblower Kathryn Stackhouse, Attorney, Planning questions about jurisdiction and disclosures (Form OSC–12), as a and Advice Division, by telephone at procedures, and in soliciting basic collection of information (OMB Control (202) 653–8971, or by fax at (202) 653– information about allegations in No. 3255–0002) under the Paperwork 5161. Information on the rule is also complaints. Reduction Act. See 65 FR 41512 (July 5, available on OSC’s Web site (at (3) To outline procedures to be 2000) for a description of the revisions www.osc.gov). followed by OSC when filers submit to both forms.
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II. Summary of Comments The respondent’s comment, however, references to the OSC complaint form); The proposed rule provided a 60-day led OSC to conclude that the final rule § 1800.1(g)(1) (to substitute comment period, and invited comments should state more clearly the procedures ‘‘complaint(s)’’ for an erroneous from current and former Federal that OSC will follow when allegations reference to ‘‘disclosure(s)’’); and to employees, employee representatives, are received in a format other than an § 1800.2(c)(2) (to conform the text more other Federal agencies, and the general OSC complaint form. Therefore, OSC is closely to that used in § 1800.1(e)). revising the final regulation, at public. OSC also posted the notice of III. Matters of Regulatory Procedure proposed rulemaking on its Web site. § 1800.1(f), to indicate that: (a) When Timely comments were received from allegations are received in a format Procedural determinations were two sources, an individual and an other than an OSC complaint form, the published in the notice of proposed executive branch agency. After carefully material submitted will be returned to rulemaking for the Regulatory considering the comments and making the filer with a blank Form OSC–11 to Flexibility Act; the Paperwork appropriate modifications, OSC is complete and return to OSC; and (b) the Reduction Act; the Unfunded Mandates complaint will be considered to be filed publishing this final rule pursuant to 5 Reform Act; the National Environmental on the date on which OSC receives the U.S.C. 1212(e). Policy Act; Executive Order 12630 The individual respondent stated that completed Form OSC–11. (Government Actions and Interference OSC anticipates that the return of making use of OSC’s complaint form with Constitutionally Protected Property allegations and supporting material may mandatory would further discourage Rights); Executive Order 12866 be required more frequently for some federal employees from reporting (Regulatory Planning and Review); months after use of the complaint form unlawful and wasteful actions by Executive Order 12988 (Civil Justice becomes mandatory on December 1, Reform); Executive Order 13045 federal agencies. He suggested that OSC 2000. After information about could simply provide the form and the (Protection of Children from mandatory use of the Form OSC–11 Environmental Health Risks and Safety information requested to complainants, becomes more widely known, however, and request that they respond. Risks); and Executive Order 13132 OSC believes that this will occur less (Federalism). There have been no OSC has implemented a variant of often. OSC also believes that, with this suggestion over the years—either changes in these procedural increasing access to the Internet, its determinations. accepting and acting on complaints in complaint form and information about whatever form submitted, or offering its complaint procedures will be more List of Subjects in 5 CFR Part 1800 persons who inquired the option of readily available to potential filers. Administrative practice and submitting their complaints on an OSC OSC’s planned implementation of complaint form. As described in the procedure, Government employees, procedures permitting electronic filing Investigations, Law enforcement, notice of proposed rulemaking, this led of complaints by October 2003 will to considerable disparities in the way Political activities (Government make that process even easier. employees), Reporting and complaint information was presented to OSC does not intend in any way to OSC. In addition, due to a lack of recordkeeping requirements, discourage federal employees from Whistleblowing. awareness about or misunderstanding of filing complaints, nor does OSC believe its role and jurisdiction, OSC received that this regulatory change will produce For the reasons set forth in the many complaints about matters that it that result. Rather, OSC believes that preamble, the Office of Special Counsel had no legal authority to pursue. this change will help employees make is amending title 5, chapter VIII, Part OSC has concluded that mandatory more informed decisions about whether 1800 as follows: use of its revised complaint form will be and what to report to OSC, and will PART 1800ÐFILING OF COMPLAINTS more efficient, effective, and useful, result in greater efficiencies in the AND DISCLOSURES both for complaint filers and OSC. As complaint process. outlined in the Rulemaking History The second comment was received 1. The authority citation for 5 CFR section, above, mandatory use of the from an executive branch agency, which Part 1800 continues to read as follows: OSC form, rather than any written agreed with the proposal as written, and format chosen by a filer, will help: (a) asked that OSC ensure that its Authority: 5 U.S.C. 1212(e). Enable complainants to obtain useful complaint form comply with Executive 2. Section 1800.1 is revised to read as information about OSC jurisdiction and Order 13166 (Improving Access to follows: procedures before filing a complaint Services for Persons with Limited (including information about matters English Proficiency). The executive § 1800.1 Filing complaints of prohibited outside OSC’s jurisdiction, election of order requires agencies to develop and personnel practices or other prohibited activities. remedies, OSC deferral policies, legal begin implementing a plan to improve elements required to establish reprisal access to federally conducted and (a) The Office of Special Counsel for whistleblowing, and certain appeal federally assisted programs and (OSC) has investigative jurisdiction over rights to the Merit Systems Protection activities, and to submit the plan to the the following prohibited personnel Board (‘‘the Board’’); (b) produce more Department of Justice by December 11, practices against current or former complete and consistent presentations 2000. OSC is reviewing its programs and Federal employees and applicants for of facts needed by OSC to review, follow activities to identify those that may be Federal employment: up on, and investigate complaints of subject to the executive order. Should (1) Discrimination, including improper employment practices; and (c) compliance with the executive order discrimination based on marital status make more efficient use of OSC’s entail any revision to the complaint or political affiliation (see § 1810.1 of limited resources, by reducing the time form, OSC will proceed accordingly. this chapter for information about OSC’s spent by staff in answering threshold Technical, non-substantive deferral policy); questions about jurisdiction and corrections have been made to the final (2) Soliciting or considering improper procedures, and in soliciting basic version of § 1800.1(e) (to correct a recommendations or statements about information about allegations in disagreement in the text of the proposed individuals requesting, or under complaints. rule between plural and singular consideration for, personnel actions;
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(3) Coercing political activity, or appropriately under an administrative paragraph (c) of this section, but should engaging in reprisal for refusal to engage appeals procedure); and include: in political activity; (6) Violation of uniformed services (1) The name, mailing address, and (4) Deceiving or obstructing anyone employment and reemployment rights telephone number(s) of the with respect to competition for under 38 U.S.C. 4301, et seq. complainant(s), and a time when the employment; (c) Complaints of prohibited person(s) making the complaint(s) can (5) Influencing anyone to withdraw personnel practices or other prohibited be safely contacted, unless the matter is from competition to improve or injure activities within OSC’s investigative submitted anonymously; the employment prospects of another; jurisdiction should be sent to: U.S. (2) The department or agency, (6) Granting an unauthorized Office of Special Counsel, Complaints location, and organizational unit preference or advantage to improve or Examining Unit, 1730 M Street, NW, complained of; and injure the employment prospects of Suite 201, Washington, DC 20036–4505. (3) A concise description of the another; (d) Complaints alleging a prohibited actions complained about, names and (7) Nepotism; personnel practice, or a prohibited positions of employees who took these (8) Reprisal for whistleblowing activity other than a Hatch Act actions, if known to the complainant, (whistleblowing is generally defined as violation, must be submitted on Form and dates, preferably in chronological the disclosure of information about a OSC–11 (‘‘Complaint of Possible order, together with any documentary Federal agency by an employee or Prohibited Personnel Practice or Other evidence the complainant may have. applicant who reasonably believes that Prohibited Activity’’). 3. Section 1800.2 is revised to read as the information shows a violation of any (1) The form includes a section (Part follows: law, rule, or regulation; gross 2) that must be completed in connection mismanagement; gross waste of funds; § 1800.2 Filing disclosures of information. with allegations of reprisal for (a) OSC is authorized by law (at 5 abuse of authority; or a substantial and whistleblowing, including identification specific danger to public health or U.S.C. 1213) to provide an independent of: and secure channel for use by current or safety); (i) Each disclosure involved; (9) Reprisal for: former Federal employees and (ii) The date of each disclosure; applicants for Federal employment in (i) Exercising certain appeal rights; (iii) The person to whom each (ii) Providing testimony or other disclosing information that they disclosure was made; and assistance to persons exercising appeal reasonably believe shows wrongdoing (iv) The type and date of any rights; by a Federal agency. The law requires personnel action that occurred because (iii) Cooperating with the Special OSC to determine whether there is a of each disclosure. Counsel or an Inspector General; or substantial likelihood that the (iv) Refusing to obey an order that (2) If a complainant who has alleged information discloses a violation of any would require the violation of law; reprisal for whistleblowing seeks to law, rule, or regulation; gross (10) Discrimination based on personal supplement a pending OSC complaint mismanagement; gross waste of funds; conduct not adverse to job performance; by reporting a new disclosure or abuse of authority; or a substantial and (11) Violation of a veterans’ personnel action, then, at OSC’s specific danger to public health or preference requirement; and discretion: safety. If so, OSC must refer the (12) Taking or failing to take a (i) The complainant will be required information to the agency head involved personnel action in violation of any law, to document the disclosure or personnel for investigation and a written report on rule, or regulation implementing or action in the Part 2 format, or the findings to the Special Counsel. The directly concerning merit system (ii) OSC will document the disclosure law does not give OSC jurisdiction to principles at 5 U.S.C. 2302(b)(1). or personnel action in the Part 2 format, investigate the disclosure. (b) OSC also has investigative a copy of which will be provided to the (b) Employees, former employees, or jurisdiction over allegations of the complainant upon OSC’s closure of the applicants for employment wishing to following prohibited activities: complaint. file a whistleblower disclosure with (1) Violation of the Federal Hatch Act (e) Form OSC–11 is available by OSC should send the information to: at title 5 of the U.S. Code, chapter 73, writing to OSC at the address shown in U.S. Office of Special Counsel, subchapter III; paragraph (c) of this section; by calling Disclosure Unit, 1730 M Street, NW, (2) Violation of the state and local OSC at (1) (800) 872–9855; or by Suite 201, Washington, DC 20036–4505. Hatch Act at title 5 of the U.S. Code, printing the form from OSC’s Web site (c) A disclosure of the type of chapter 15; (at http://www.osc.gov). information described in paragraph (a) (3) Arbitrary and capricious (f) Except for complaints alleging only of this section should be submitted in withholding of information prohibited a Hatch Act violation, OSC will not writing, using any of the following under the Freedom of Information Act at process a complaint submitted in any formats: 5 U.S.C. 552 (except for certain foreign format other than a completed Form (1) Filers may use Form OSC–12 and counterintelligence information); OSC–11. If a person uses a format other (‘‘Disclosure of Information’’), which (4) Activities prohibited by any civil than the required OSC form to file a provides more information about OSC service law, rule, or regulation, complaint (other than a Hatch Act jurisdiction and procedures for including any activity relating to allegation), the material received by processing whistleblower disclosures. political intrusion in personnel OSC will be returned to the filer with a This form is available from OSC by decisionmaking; blank Form OSC–11 to complete and writing to the address shown in (5) Involvement by any employee in return to OSC. The complaint will be paragraph (b) of this section; by calling any prohibited discrimination found by considered to be filed on the date on OSC at (1) (800) 572–2249; or by any court or appropriate administrative which OSC receives the completed printing the form from OSC’s Web site authority to have occurred in the course Form OSC–11. (at http://www.osc.gov). of any personnel action (unless the (g) Complaints alleging only a Hatch (2) Filers may use another written Special Counsel determines that the Act violation may be submitted in any format, but the submission should allegation may be resolved more written form to the address shown in include:
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(i) The name, mailing address, and provided by law within the jurisdiction maximum Tier Three CMP not to exceed telephone number(s) of the person(s) of the agency (with the exception of $1,100,000 for violating certain laws. making the disclosure(s), and a time certain specifically listed statutes) by We first determine the appropriate when that person(s) can be safely the inflation adjustment formula set CPI–U. The statute requires the FDIC to contacted by OSC; forth in section 5(b) of the Inflation use the CPI–U for June of the calendar (ii) The department or agency, Adjustment Act. year preceding the year of adjustment. location and organizational unit To satisfy the requirements of the Because we are adjusting CMPs in 2000, complained of; and DCIA, the FDIC is amending those we use the CPI–U for June 1999, which (iii) A statement as to whether the sections of part 308 of its regulations was 166.2. We must also determine the filer consents to the disclosure of his or pertaining to its Rules of Practice and CPI–U for June of the year the CMP was her identity to the agency by OSC in Procedure which address CMPs. The last set by law or adjusted for inflation. connection with any referral to the amount of each CMP which the FDIC Because the FDIC last adjusted the appropriate agency. has jurisdiction to impose has been CMPs under 12 U.S.C. 1818 in 1996, we increased according to the prescribed Dated: October 25, 2000. use the CPI–U for June 1996, which was formula. The penalties were last 156.7. Elaine Kaplan, adjusted in 1996. (61 FR 57987). Any Special Counsel. increase in penalty amounts under the We next calculate the cost of living [FR Doc. 00–27828 Filed 10–30–00; 8:45 am] DCIA shall apply only to violations adjustment or inflation factor. To do this, we divide the CPI–U for June 1999 BILLING CODE 7405±01±P which occur after the effective date of the increase. (166.2) by the CPI–U for June 1996 (156.7). The result is 1.061 (i.e., a 6.1 Summary of Calculation FEDERAL DEPOSIT INSURANCE percent increase). CORPORATION The Inflation Adjustment Act requires Third, we calculate the raw inflation that each CMP amount be increased by adjustment. To do this, multiply the 12 CFR Part 308 the ‘‘cost of living’’ adjustment, which maximum penalty amounts by the is defined as the percentage by which inflation factor. In our example, RIN 3064±AC45 the Consumer Price Index (CPI–U) 1 for $1,100,000 multiplied by the inflation Rules of Practice and Procedure the month of June of the calendar year factor of 1.061 equals $1,167,100. preceding the adjustment exceeds the Fourth, we round the raw inflation AGENCY: Federal Deposit Insurance CPI for the month of June of the amounts according to the rounding rules Corporation. calendar year in which the amount of in section 5(a) of the Inflation ACTION: Final rule. the CMP was last set or adjusted Adjustment Act. Since we round only pursuant to law. Any increase is to be the increased amount, we calculate the SUMMARY: The Federal Civil Monetary rounded to the nearest multiple of $10 increased amount by subtracting the Penalty Inflation Adjustment Act of in the case of penalties less than or current maximum penalty amounts from 1990 requires all federal agencies with equal to $100; multiple of $100 in the the raw maximum inflation statutory authority to impose civil case of penalties greater than $100 but adjustments. Accordingly, the increased money penalties (CMPs) to evaluate and less than or equal to $1,000; multiple of amount for the maximum penalty in our adjust those CMPs every four years. The $1,000 in the case of penalties greater example is $67,100 (i.e., $1,167,100 less FDIC last adjusted its CMP statutes in than $1,000 but less than or equal to $1,100,000). Under the rounding rules, 1996. The FDIC is issuing this final rule $10,000; multiple of $5,000 in the case if the penalty is greater than $200,000, to implement the required adjustments of penalties greater than $10,000 but we round the increase to the nearest to its CMP statutes. less than or equal to $100,000; multiple multiple of $25,000. Therefore, the EFFECTIVE DATE: October 31, 2000. of $10,000 in the case of penalties maximum penalty increase for our greater than $100,000 but less than or FOR FURTHER INFORMATION CONTACT: example is $75,000. John equal to $200,000; and multiple of T. Mahshie, Counsel, (202) 898–3503, $25,000 in the case of penalties greater Fifth, we add the rounded increase to Compliance and Enforcement Section, than $200,000. Under the DCIA, the first the maximum penalty amount last set or Legal Division, 550 17th Street, NW, adjustment may not exceed ten percent adjusted. In our example, $1,100,000 Washington, DC 20429. of the current penalty amount. plus $75,000 yields a maximum SUPPLEMENTARY INFORMATION: inflation adjusted penalty amount of Example $1,175,000. I. Background To explain the inflation adjustment Summary of Adjustments The Debt Collection Improvement Act calculation for CMP amounts that were (DCIA) (Pub. L. 104–134) amended last adjusted in 1996, we will use the Under the Inflation Adjustment Act, section 4 of the Federal Civil Penalties following example. Under 12 U.S.C. the FDIC must adjust for inflation the Inflation Adjustment Act of 1990 1818(i), as adjusted under 12 CFR civil monetary penalties in statutes that (Inflation Adjustment Act) (28 U.S.C. 308.132(c), the FDIC may impose a daily it administers. The following chart 2461 note), to require the head of each displays the adjusted civil money Federal agency to enact regulations 1 The CPI–U is compiled by the Bureau of penalty amounts for the enumerated within 180 days of the enactment of the Statistics of the Department of Labor. To calculate statues. The amounts in this chart apply the adjustment, the FDIC used the Department of DCIA and at least once every four years Labor, Bureau of Labor Statistics B All Urban to violations that occur after October 31, thereafter, that adjust each CMP Consumers tables to get the CPI–U values. 2000:
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Current maximum U.S. Code citation amount New maximum amount
12 U.S.C. 1817(a): Tier One penalties ...... 2,000 2,200 Tier Two penalties ...... 22,000 22,000 Tier Three penalties ...... 1,100,000 1,175,000 12 U.S.C. 1817(c): Tier One penalties ...... 2,000 2,200 Tier Two penalties ...... 22,000 22,000 Tier Three penalties 1,100,000 1,175,000. 12 U.S.C. 1817(j): Tier One penalties ...... 5,500 5,500 Tier Two penalties ...... 27,500 27,500 Tier Three penalties ...... 1,100,000 1,175,000 12 U.S.C. 1818(i)(2): Tier One penalties ...... 5,500 5,500 Tier Two penalties ...... 27,500 27,500 Tier Three penalties ...... 1,100,000 1,175,000 12 U.S.C. 1820(e)(4) 5,500 5,500 12 U.S.C. 1828(a)(3) 110 110 12 U.S.C. 1828(h) 110 110 12 U.S.C. 1829b(j) ...... 11,000 11,000 12 U.S.C. 1832(c) ...... 1,100 1,100 12 U.S.C. 1884 ...... 110 110 12 U.S.C. 1972(2)(F): Tier One penalties ...... 5,500 5,500 Tier Two penalties ...... 27,500 27,500 Tier Three penalties ...... 1,100,000 1,175,000 12 U.S.C. 3108(b): Tier One penalties ...... 5,500 5,500 Tier Two penalties ...... 27,500 27,500 Tier Three penalties ...... 1,100,000 1,175,000 12 U.S.C. 3349(b): Tier One penalties ...... 5,500 5,500 Tier Two penalties ...... 27,500 27,500 Tier Three penalties ...... 1,100,000 1,175,000 12 U.S.C. 3909(d) ...... 1,100 1,100 12 U.S.C. 4717(b): Tier One penalties ...... 5,500 5,500 Tier Two penalties ...... 27,500 27,500 Tier Three penalties ...... 1,100,000 1,175,000 15 U.S.C. 78u±2 ...... 5,500 5,500 55,000 60,000 55,000 60,000 110,000 120,000 275,000 300,000 550,000 575,000 31 U.S.C. 3802 ...... 5,500 5,500 42 U.S.C. 4012a(f) ...... 350/105,000 350/115,000
II. Section-by-Section Analysis Section 308.132 institution for each day the violation continues to a maximum of the lesser of Section 308.116(b) Section 308.132 pertains to the $1,175,000 or one percent of the total Section 308.116(b) pertains to the manner in which the FDIC assesses assets of the institution for each day the amount of any CMP that may be CMPs. Paragraph (c)(2) of that section violation continues. assessed for violations of the Change in pertains to the CMPs imposed pursuant Paragraph (c)(2)(iii) pertains to Bank Control Act of 1978 (12 U.S.C. to section 7(a) of the Federal Deposit penalties for the submission of false or 1817(j)). This section has been amended Insurance Act (FDIA) (12 U.S.C. 1817(a)) misleading Call Reports or information. by increasing the Tier Three penalty for the late filing of a bank’s Reports of Paragraph (c)(2)(iii)(A) of that section amount from $1,100,000 for each day Condition and Income (Call Reports) or has been amended to reflect the increase the violation continues to $1,175,000 for for the submission of false or misleading in Tier One penalty amounts from a each day the violation continues or, in Call Reports or information. Paragraph maximum of $2,000 per day for each the case of a depository institution, (c)(2)(i) has been amended to reflect the day the information is not corrected to increasing the penalty from an amount increase in the Tier One penalty amount a maximum of $2,200 per day for each not to exceed the lesser of $1,100,000 or from a maximum of $2,000 per day to day the information is not corrected. one percent of the total assets of the $2,200 per day for each day the failure Paragraph (c)(2)(iii)(C) of that section institution for each day the violation to file continues. Paragraph (c)(ii)(3)(C) reflects the increase in Tier Three continues to the lesser of $1,175,000 or has been amended to increase the Tier penalties from an amount not to exceed one percent of the total assets of the Three penalty amount from a maximum the lesser of $1,100,000 or one percent institution for each day the violation of the lesser of $1,100,000 or one of the total assets of the institution for continues. percent of the total assets of the each day the information is not
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No change has been made to 1817(c)(4)(B)) will increase from an Paragraph (c)(3)(xiii) of § 308.132 Tier Two penalty amounts by the DCIA. amount not to exceed the lesser of indicates that pursuant to the Paragraph (c)(3)(i) sets forth the $1,100,000 or one percent of the total Community Development Banking and increases for CMPs assessed pursuant to assets of the institution for each day Financial Institution Act (Community section 8(i)(2) of the FDIA (12 U.S.C. during which the failure to file Development Banking Act) (12 U.S.C. 1818(i)(2)). A Tier Three CMP which continues or the false or misleading 4717(b)) a CMP may be assessed for may be assessed pursuant to section information is not corrected to an violations of the Community 8(i)(2)(C) (12 U.S.C. 1818(i)(2)(C)) will amount not to exceed the lesser of Development Banking Act pursuant to increase from an amount not to exceed, $1,175,000 or one percent of the total section 8(i)(2) of the FDIA (12 U.S.C. in the case of any person other than an assets of the institution for each day 1818(i)(2)). Such CMP amounts will insured depository institution during which the failure to file increase in the amounts set forth in $1,100,000 or, in the case of any insured continues or the false or misleading paragraph (c)(3)(i) of § 308.132 which depository institution, the amount will information is not corrected. Tier Two contains the increases for section 8(i)(2). increase from an amount not to exceed penalties remain the same. Paragraph (c)(3)(xiv) of § 308.132 sets the lesser of $1,100,000 or one percent Paragraph (c)(3)(ix) of § 308.132 sets forth that pursuant to section 21B of the of the total assets of such institution for forth the increases in the CMP amounts Securities Exchange Act of 1934 each day during which the violation, that may be assessed pursuant to the (Exchange Act) (15 U.S.C. 78u–2), CMPs practice, or breach continues to an Bank Holding Company Act of 1970 (12 may be assessed for violations of certain amount not to exceed the lesser of U.S.C. 1841 et seq.) for prohibited tying provisions of the Exchange Act, where $1,175,000 or one percent of the total arrangements. A Tier Three CMP which such penalties are in the public interest. assets of such institution for each day may be assessed pursuant to 12 U.S.C. The Tier One CMP amounts which may during which the violation, practice, or 1972(2)(F)(iii) will increase from an be assessed pursuant to 15 U.S.C. 78u– breach continues. amount not to exceed, in the case of any 2(b)(1) will increase from an amount not Paragraph (c)(3)(i)( A) of § 308.132 person other than an insured depository to exceed $5,500 for a natural person or lists a number of statutes which provide institution $1,100,000 for each day $55,000 for any other person for jurisdiction to the FDIC to assess CMPs during which the violation, practice, or violations set forth in 15 U.S.C. 78u– under section 8(i)(2) of the FDIA for breach continues to an amount not to 2(a), to $5,500 for a natural person or violation thereof, including, the Home exceed $1,175,000 for each day during $60,000 for any other person. The Tier Mortgage Disclosure Act (12 U.S.C. 2804 which the violation, practice, or breach Two CMP which may be assessed et seq.) and implementing Regulation C continues. In the case of any insured pursuant to 15 U.S.C. 78u–2(b)(2) for (12 CFR 203.6), the Expedited Funds depository institution, Tier Three each violation set forth in 15 U.S.C. Availability Act (12 U.S.C. 4001 et seq.), penalties will increase from an amount 78u–2(a) will increase from an amount the Truth in Savings Act (12 U.S.C. 4301 not to exceed the lesser of $1,100,000 or not to exceed $55,000 for a natural et seq.), the Real Estate Settlement one percent of the total assets of such person to $275,000 for any other person Procedures Act (12 U.S.C. 2601 et seq.) institution for each day during which to an amount not to exceed $60,000 for and implementing Regulation X (24 CFR the violation, practice, or breach a natural person or $300,000 for any Part 3500), the Truth in Lending Act (15 continues to an amount not to exceed other person if the act or omission U.S.C. 1601 et seq.), the Fair Credit the lesser of $1,175,000 or one percent involved fraud, deceit, manipulation, or Reporting Act (15 U.S.C. 1681 et seq.), of the total assets of such institution for deliberate or reckless disregard of a the Equal Credit Opportunity Act (15 each day during which the violation, regulatory requirement. The Tier Three U.S.C. 1691 et seq.), the Fair Debt practice, or breach continues. Tier One CMP which may be assessed pursuant to Collection Practices Act (15 U.S.C. 1692 and Tier Two penalties remain the 15 U.S.C. 78u–2(b)(3) for each violation et seq.), the Electronic Funds Transfer same. set forth in 15 U.S.C. 78u–2(a), in an Act (15 U.S.C. 1693 et seq.), and the Fair Paragraph (c)(3)(x) of § 308.132 amount not to exceed $110,000 for a Housing Act (42 U.S.C. 3601 et seq.). indicates that pursuant to the natural person or $550,000 for any other Increases in the amount of any CMP International Banking Act of 1978 (IBA) person, if the act or omission involved which the FDIC may assess for (12 U.S.C. 3108(b)), a CMP may be fraud, deceit, manipulation, or violations of those statutes are the same assessed for failure to comply with the deliberate or reckless disregard of a as the increases for section 8(i)(2) requirements of the IBA pursuant to regulatory requirement; and such act or penalties. Therefore, for the foregoing section 8(i)(2) of the FDIA (12 U.S.C. omission directly or indirectly resulted statutes, as in section 8(i)(2), only the 1818(i)(2)). Such CMP will increase in in substantial losses, or created a Tier Three penalty amounts will the amounts set forth in paragraph significant risk of substantial losses to increase. (c)(3)(i) of § 308.132 which contains the other persons or resulted in substantial Paragraph (c)(3)(ii) of § 308.132 increases for section 8(i)(2). pecuniary gain to the person who reflects the increases in CMP amounts Paragraph (c)(3)(xi) of § 308.132 sets committed the act or omission to an that may be assessed pursuant to section forth the increase in CMP that may be amount not to exceed $120,000 for a 7(c) of the FDIA for late filing or the assessed pursuant to section 8(i)(2) of natural person or $575,000 for any other submission of false or misleading the FDIA (12 U.S.C. 1818(i)(2)), as made person. certified statements. A Tier One CMP applicable by 12 U.S.C. 3349(b), where Paragraph (c)(3)(xvi) of § 308.132 sets pursuant to section 7(c)(4)(A) of the a financial institution seeks, obtains, or forth the CMP that may be assessed FDIA (12 U.S.C. 1817(c)(4)(A)) will gives any other thing of value in pursuant to the Flood Disaster increase from an amount not to exceed exchange for the performance of an Protection Act (FDPA)(42 U.S.C. $2,000 per day to an amount not to appraisal by a person that the institution 4012a(f)) against any regulated lending exceed $2,200 for each day during knows is not a state certified or licensed institution that engages in a pattern or which the failure to file continues or the appraiser in connection with a federally practice of violations of the FDPA. The
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Exemption From Public Notice and rulemaking is not necessary for this procedure, Banks, banking, Claims, Comment final rule. Accordingly, the RFA does Crime, Equal access to justice, Ex parte communications, Fraud, Hearing Because the law requires the FDIC to not require an initial regulatory flexibility analysis. Nevertheless, the procedure, Lawyers, Penalties, State amend its rules, provides the specific nonmember banks. adjustments to be made and leaves the FDIC has considered the likely impact FDIC no discretion in calculating the of the rule on small entities and believes For the reasons set out in the amount of those adjustments, the that the rule will not have a significant preamble, part 308 of chapter III of title changes are ministerial, technical and impact on a substantial number of small 12 of the Code of Federal Regulations is entities. noncontroversial, and the law requires amended as set forth below. that the regulation implementing the VI. Small Business Regulatory PART 308ÐRULES OF PRACTICE AND adjustments be published in the Federal Enforcement Fairness Act PROCEDURE Register within 180 days of enactment The Small Business Regulatory of the DCIA, the FDIC has determined Enforcement Fairness Act of 1996 1. The authority citation continues to for good cause that public notice and (SBREFA) (Public Law 104–121) read as follows: comment is unnecessary and provides generally for agencies to report Authority: 5 U.S.C. 504, 554–557; 12 impracticable under the APA (5 U.S.C. rules to Congress and for Congress to U.S.C. 93(b), 164, 505, 1815(e), 1817, 1818, 553(b)(3)(B)), and that the rule should review such rules. The reporting 1820, 1828, 1829, 1829b, 1831i, 1831o, be published in final form. requirement is triggered in instances 1831p–1, 1832(c), 1884(b), 1972, 3102, 3108(a), 3349, 3909, 4717; 15 U.S.C. 78(h) IV. Effective Date where the FDIC issues a final rule as defined by the Administrative and (i), 78o–4(c), 78o–5, 78q–1, 78s, 78u, 78u–2, 78u–3 and 78w; 28 U.S.C. 2461 note; For the same reasons that the FDIC for Procedures Act (APA) at 5 U.S.C. 551. 31 U.S.C. 330, 5321; 42 U.S.C. 4012a; sec. good cause has determined that public Because the FDIC is issuing a final rule 31001(s), Pub. L. 104–134, 110 Stat. 1321– notice and comment is unnecessary, as defined by the APA, the FDIC will 358. impractical and contrary to the public file the reports required by the SBREFA. § 308.116 [Amended] interest, the FDIC finds that it has good The Office of Management and Budget cause to adopt an effective date that is has determined that this final revision 2. In § 308.116, amend paragraphs less than 30 days after the date of to part 308 does not constitute a (b)(4)(iii)(A) and (b)(4)(iii)(B) by publication in the Federal Register ‘‘major’’ rule as defined by the statute. removing $1,100,000 and adding pursuant to the APA (5 U.S.C. 553(d)), VII. The Treasury and General $1,175,000 in its place. and therefore, the regulation is effective Government Appropriations Act, 1999 § 308.132 [Amended] upon publication. Moreover, section 302 Assessment of Federal Regulations and of the Riegle Community Development Policies on Families 3. In § 308.132, amend: and Regulatory Improvement Act of The FDIC has determined that this a. Paragraphs (c)(2)(i), (c)(2)(iii)(A), 1994 2 states that a final rule imposing final rule will not affect family well- and (c)(3)(ii) by removing $2,000 and new requirements must take effect on being within the meaning of section 654 adding $2,200 in its place. the first day of a calendar quarter of the Treasury and General b. Paragraphs (c)(2)(iii)(C), (c)(3)(i), following its publication. That section Government Appropriations Act, 1999, and (c)(3)(ix) by removing $1,100,000 provides, however, that an agency may Pub. L. 105–277, 112 Stat. 2681 (1998). and adding $1,175,000 in its place each determine that the rule should take time it appears. effect earlier upon a finding of good VIII. Paperwork Reduction Act c. Paragraph (c)(3)(xiv) by removing cause. No collection of information pursuant $55,000 and adding in its place $60,000 each time it appears; by removing Under the statute, agencies must make to section 3504(h) of the Paperwork $110,000 and adding in its place the required CMP inflation adjustments: Reduction Act of 1980 (44 U.S.C. 3501 $120,000; by removing $275,000 and (1) According to the formula in the et seq.) is contained in this rule. adding in its place $300,000; and by statute; and (2) within four years of the Consequently, no information has been submitted to the Office of Management removing $550,000 and adding in its last inflation adjustment, or by October and Budget for review. place $575,000. 31, 2000. Agencies have no discretion as d. Paragraph (c)(3)(xvi) by removing to the amount or timing of the IX. Authority for the Regulation $105,000 and adding in its place adjustment. The regulation is This regulation is authorized by the $115,000. ministerial, technical, and FDIC’s general rulemaking authority and noncontroversial. Accordingly, the FDIC Dated at Washington, D.C., this 17th day of pursuant to its fundamental October, 2000. believes that notice and comment are responsibilities to ensure the safety and By order of the Board of Directors. unnecessary. For these same reasons, soundness of insured depository the FDIC believes that there is good institutions. Specifically, 12 U.S.C. Federal Deposit Insurance Corporation. cause to make this rule effective 1819(a) Tenth provides the FDIC with Robert E. Feldman, immediately upon publication. general authority to issue such rules and Executive Secretary. [FR Doc. 00–27864 Filed 10–30–00; 8:45 am] 2 12 U.S.C. 4802. 3 5 U.S.C. 603. BILLING CODE 6714±01±P
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DEPARTMENT OF THE TREASURY Under the second tier, to the extent the 704(c) gain (i.e., the excess of the entire liability has not been allocated amount of reverse section 704(c) gain Internal Revenue Service under the first tier, a partner will be attributable to an item of property over allocated an amount of liability equal to the section 704(c) minimum gain on that 26 CFR Part 1 the gain that partner would be allocated property) with respect to property that under section 704(c) if the partnership is subject to such liability. [TD 8906] disposed of all partnership property 3. Interplay With the Disguised Sales subject to one or more nonrecourse RIN 1545±AX09 Rules liabilities in full satisfaction of the Allocation of Partnership Debt liabilities (section 704(c) minimum One commentator noted that the gain). Under the third tier, a partner is proposed amendments to § 1.752–3 AGENCY: Internal Revenue Service (IRS), allocated any excess nonrecourse would impact the disguised sales rules Treasury. liabilities (i.e., nonrecourse liabilities in relating to transfers of encumbered ACTION: Final regulations. excess of the portion allocable in the property. The disguised sale rules treat first and second tiers) under one of a contribution of property encumbered SUMMARY: This document contains final several methods (i.e., partner’s share of by a ‘‘non-qualified’’ liability (generally, regulations relating to the allocation of profits or certain reasonably expected a liability incurred within two years of nonrecourse liabilities by a partnership. deductions) that the partnership may the contribution to the partnership that The final regulations revise tier three of choose. is incurred in anticipation of such the three-tiered allocation structure The proposed regulations modified contribution) as a disguised sale to the contained in the current nonrecourse the third tier to allow an additional extent that the amount of the liability liability regulations, and also provide method under which a partnership may exceeds the contributing partner’s share guidance regarding the allocation of a allocate an excess nonrecourse liability of the liability immediately after the single nonrecourse liability secured by based on the excess section 704(c) gain contribution. Section 1.707–5(a)(2)(ii) multiple properties. (i.e., the excess of the amount of section provides that a partner’s share of a DATES: Effective Date: These regulations 704(c) built-in gain attributable to an nonrecourse liability, for purposes of are effective October 31, 2000. item of property over the amount of the disguised sale rules, is determined Applicability Date: For dates of section 704(c) minimum gain on that by applying the same percentage used to applicability of these regulations, see property) attributable to the properties determine the partner’s share of the § 1.752–5(a). that are subject to the liability. In excess nonrecourse liability under FOR FURTHER INFORMATION CONTACT: Dan addition, for purposes of determining § 1.752–3(a)(3). Carmody, (202) 622–3070 (not a toll-free section 704(c) minimum gain under the Because the proposed amendments to number). second tier, the proposed regulations § 1.752–3(a)(3) would allow excess nonrecourse liabilities to be allocated SUPPLEMENTARY INFORMATION: provided that if a partnership holds multiple properties subject to a single according to an amount, rather than a Introduction liability, the liability may be allocated percentage, the potential for ambiguity exists. The commentator suggested that This document revises § 1.752–3 of among the properties based on any the disguised sale rules should be the Income Tax Regulations (26 CFR reasonable method. A method is not modified to define a partner’s share of part 1) relating to the allocation by a reasonable under the proposed a nonrecourse liability by cross- partnership of nonrecourse liabilities. regulations if it allocates to any property an amount that exceeds the fair market reference to § 1.752–3(a), rather than Background value of the property. limiting the definition to the third tier. The commentator noted that On January 13, 2000, the IRS 2. Allocation of Debt in Accordance maintaining separate definitions for the published in the Federal Register a With Reverse Section 704(c) Gain same term was burdensome and notice of proposed rulemaking [REG– One commentator noted that the confusing for practitioners, and noted 103831–99 (65 FR 2084)] to provide additional method provided in the that the disguised sale rules provide guidance relating to the allocation of proposed regulations under the third consistency between sections 707(a) and nonrecourse liabilities by a partnership. tier covers only built-in gain on section 752 with respect to the definition of a The IRS and Treasury received public 704(c) property, which includes built-in partner’s share of a recourse liability by comments concerning the proposed gain (i.e., book value minus adjusted reference to § 1.752–2 without regulations, and a public hearing was basis) attributable to contributed limitation. held on May 3, 2000. After property, but not built-in gain The preamble to § 1.707–5 explains consideration of the comments received, attributable to property subject to a that the cross-reference defining a the proposed regulations are adopted as revaluation (pursuant to § 1.704– partner’s share of nonrecourse liabilities revised by this Treasury decision. 1(b)(2)(iv)(f)) (i.e., reverse section 704(c) is limited to the third tier of § 1.752–3(a) Explanation of Revisions and Summary gain). The commentator noted that this because the adoption of the full three- of Comments distinction is not made in allocating tier approach in the disguised sale nonrecourse liabilities in accordance context would provide an inverse 1. In General with section 704(c) minimum gain relationship between the gain inherent Treasury regulation § 1.752–3 under the second tier and questioned in the contributed property and the currently provides a three-tiered system the policy reason for excluding the extent to which a disguised sale of the for allocating nonrecourse liabilities. reverse section 704(c) gain in applying property results from the encumbrance. The three-tiered system applies the third tier. In response to this See preamble (57 FR 44974). The sequentially. Under the first tier, a comment, the final regulations provide contributing partner’s share of the partner is allocated an amount of the that an excess nonrecourse liability may liability under § 1.752–3(a) generally liability equal to that partner’s share of be allocated under the third tier in will increase as the amount of built-in partnership minimum gain under accordance with excess section 704(c) gain on the property increases, which in section 704(b). See § 1.704–2(g)(1). gain as well as excess reverse section turn would reduce the extent to which
VerDate 112000 15:45 Oct 30, 2000 Jkt 194001 PO 00000 Frm 00008 Fmt 4700 Sfmt 4700 E:\FR\FM\31OCR1.SGM pfrm11 PsN: 31OCR1 Federal Register / Vol. 65, No. 211 / Tuesday, October 31, 2000 / Rules and Regulations 64889 the contribution would be treated as a applying the rule in the proposed may be ‘‘subject to’’ the same disguised sale. regulations and then again in indebtedness. Bifurcating the debt The same problem would exist if the determining a partner’s interest in among multiple properties so that each proposed modifications to the third tier partnership profits under the third tier. property is treated as subject to only a were taken into account for purposes of To the extent that a portion of excess portion of the debt actually would limit § 1.707–5(a)(2)(ii). To the extent that section 704(c) gain remains after a taxpayers’ flexibility and narrow the excess section 704(c) gain exists with liability has been fully allocated, there scope of the proposed change to the respect to a property, the partnership is no double-counting, and the third tier. Accordingly, the could allocate excess nonrecourse remaining portion of the gain should be commentator’s recommendation is not liabilities to the contributing partner. taken into account as one factor to be adopted. However, the final regulations The greater the built-in gain with considered in determining a partner’s add an example which clarifies the respect to a property, the less likely it interest in partnership profits under operation of this rule. would be that a disguised sale would § 1.752–3(a)(3) and Rev. Rul. 95–41. result from the contribution. In order to 6. Retroactive Effective Date avoid this inappropriate result, the final 5. Applicability of § 1.752–3(b) to Third- regulations clarify that the Tier Allocations One commentator suggested that the modifications made to the third tier do The proposed regulations provide regulations should apply on a not apply for purposes of § 1.707– rules regarding the allocation of a single retroactive basis. This suggestion has 5(a)(2)(ii). Thus, for purposes of the liability among multiple properties. The not been adopted. However, the final disguised sale rules, the partner’s share proposed regulations generally provide regulations respond to this of nonrecourse liabilities continues to that if a partnership has multiple recommendation by providing an be determined under the third tier by properties subject to a single liability, optional effective date for those reference to the partner’s share of profits for purposes of determining the amount taxpayers who wish to apply the rules or certain reasonably expected of section 704(c) minimum gain in currently to liabilities incurred prior to deductions. applying the second tier, the the issuance of these regulations. partnership may allocate to each 4. Treatment of ‘‘Extra’’ Excess Section property an amount of the liability that, 7. Additional Comments Requested 704(c) Gain when combined with any other The preamble to the proposed Rev. Rul. 95–41 (1995–1 C.B. 132) liabilities allocated to the property, do regulations requested comments holds that if a partnership determines not exceed the property’s fair market regarding the allocation of a single the partners’ interests in partnership value. The portion of the liability liability among multiple partnerships. profits based on all of the facts and allocated to each property will be circumstances relating to the economic treated as a separate loan in determining Although no formal comments were arrangement of the partners, excess the section 704(c) minimum gain submitted on this issue, several section 704(c) gain is one factor, but not attributable to the property. commentators have indicated that the only factor, to be considered under One commentator asked that the rule additional guidance regarding § 1.752–3(a)(3). The preamble to the for allocating a single liability among appropriate methods of allocating such proposed regulations provides that this multiple properties under the second liabilities would be helpful. The IRS holding will remain relevant where a tier also apply to third tier allocations. and Treasury again request comments partnership does not allocate For purposes of the second tier, where regarding this issue. nonrecourse debt under the third tier nonrecourse debt is cross-collateralized, Special Analyses based on the excess section 704(c) gain it is necessary to determine how much attributable to the property that is of the nonrecourse debt is attributable to It has been determined that this subject to the debt. The preamble also each partnership property, since debt is Treasury decision is not a significant provides that once a partnership has allocated among the partners under that regulatory action as defined in allocated nonrecourse indebtedness tier based upon the amount by which Executive Order 12866. Therefore, a pursuant to the rule in the proposed the debt attributable to each specific regulatory assessment is not required. It regulations based upon excess section property exceeds the tax basis of such also has been determined that section 704(c) gain, that excess section 704(c) property. (See § 1.704–3(a)(2), which 553(b) of the Administrative Procedure gain cannot again be considered in provides that, except in limited Act (5 U.S.C. chapter 5) and the determining a partner’s interest in circumstances, section 704(c) applies on Regulatory Flexibility Act (5 U.S.C. partnership profits. a property-by-property basis.) Under the chapter 6) do not apply to these proposed modification to the third tier, One commentator asked, in situations regulations and, therefore, a Regulatory where the amount of a liability allocated any remaining nonrecourse liability of Flexibility Analysis is not required. to a partner under the third tier the partnership could be allocated to a Pursuant to section 7805(f) of the pursuant to the rule contained in the partner up to the excess section 704(c) Internal Revenue Code, the notice of proposed regulations is less than the gain allocable to the partner on property proposed rulemaking preceding these partner’s share of excess 704(c) gain, subject to that liability. There is no need regulations was submitted to the Small whether the remaining excess 704(c) to bifurcate cross-collateralized debt gain should be taken into account for under this tier, since excess section Business Administration for comment purposes of determining a partner’s 704(c) gain is not limited by the amount on its impact on small business. interest in partnership profits under the of debt attributable to specific Drafting Information third tier with regard to other liabilities. partnership property. So long as a The statement contained in the partner’s share of excess section 704(c) The principal author of these preamble regarding the impact of the gain is attributable to property that is regulations is Christopher T. Kelley, proposed regulations on Rev. Rul. 95–41 ‘‘subject to’’ the debt being allocated, Office of Chief Counsel (Passthroughs reflects a concern on the part of IRS and the debt may be allocated in accordance and Special Industries). However, other Treasury that taxpayers might count the with that partner’s share of such excess personnel from the IRS and Treasury same excess section 704(c) gain in section 704(c) gain. Multiple properties participated in their development.
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List of Subjects in 26 CFR Part 1 liability that, when combined with any liability for each of Properties X and Y (in Income taxes, Reporting and other liabilities allocated to the each case, $60 liability minus $40 adjusted recordkeeping requirements. property, is in excess of the fair market basis). As a result, a portion of the liability value of the property at the time the is allocated pursuant to paragraph (a)(2) of Adoption of Amendments to the liability is incurred. The portion of the this section as follows: Regulations nonrecourse liability allocated to each Partner Property Tier 1 Tier 2 Accordingly, 26 CFR part 1 is item of partnership property is then amended as follows: treated as a separate loan under paragraph (a)(2) of this section. In A ...... X ...... $0 $0 general, a partnership may not change Y ...... 0 0 PART 1ÐINCOME TAXES B ...... X ...... 0 20 the method of allocating a single Y ...... 0 20 Par. 1. The authority citation for part nonrecourse liability under this 1 continues to read in part as follows: paragraph (b) while any portion of the (iv) PRS has $80 of excess nonrecourse Authority: 26 U.S.C. 7805 * * * liability is outstanding. However, if one liability that it may allocate in any manner or more of the multiple properties Par. 2. Section 1.752–3 is amended as consistent with paragraph (a)(3) of this follows: subject to the liability is no longer section. PRS determines to allocate the $80 1. Paragraph (a)(3) is amended by subject to the liability, the portion of the of excess nonrecourse liabilities to the adding three sentences immediately liability allocated to that property must partners up to their share of the remaining before the last sentence in the be reallocated among the properties still section 704(c) gain on the properties, with paragraph. subject to the liability so that the any remaining amount of liabilities being 2. Paragraph (b) is redesignated as amount of the liability allocated to any allocated equally to A and B consistent with paragraph (c). property does not exceed the fair market their equal interests in partnership profits. B 3. New paragraph (b) is added. value of such property at the time of has $70 of remaining section 704(c) gain ($10 4. Newly designated paragraph (c) is reallocation. on Property X and $60 on Property Y), and amended by revising the introductory (2) Reductions in principal. For thus will be allocated $70 of the liability in text and adding a new Example 3. purposes of this paragraph (b), when the accordance with this gain. The revisions and addition read as outstanding principal of a partnership The remaining $10 is divided equally follows: liability is reduced, the reduction of between A and B. Accordingly, the overall § 1.752±3 Partner's share of nonrecourse outstanding principal is allocated allocation of the $120 nonrecourse liability is liabilities. among the multiple properties in the as follows: (a) * * * same proportion that the partnership liability originally was allocated to the (3) * * * Additionally, the Part- Tier 1 Tier 2 Tier 3 Total partnership may first allocate an excess properties under paragraph (b)(1) of this ner nonrecourse liability to a partner up to section. (c) Examples. The following examples A ...... $0 $0 $5 $5 the amount of built-in gain that is B ...... 0 40 75 115 allocable to the partner on section illustrate the principles of this section: 704(c) property (as defined under * * * * * § 1.704–3(a)(3)(ii)) or property for which Example 3. Allocation of liability among Par. 3. In § 1.752–5, paragraph (a) is reverse section 704(c) allocations are multiple properties. (i) A and B are equal amended by adding three sentences partners in a partnership (PRS). A contributes applicable (as described in § 1.704– $70 of cash in exchange for a 50-percent after the first sentence: 3(a)(6)(i)) where such property is subject interest in PRS. B contributes two items of § 1.752±5 Effective dates and transition to the nonrecourse liability to the extent property, X and Y, in exchange for a 50- rules. that such built-in gain exceeds the gain percent interest in PRS. Property X has a fair described in paragraph (a)(2) of this market value (and book value) of $70 and an (a) In general. * * * However, section with respect to such property. adjusted basis of $40, and is subject to a § 1.752–3(a)(3) fifth, sixth, and seventh nonrecourse liability of $50. Property Y has This additional method does not apply sentences, (b), and (c) Example 3, do not for purposes of § 1.707–5(a)(2)(ii). To a fair market value (and book value) of $120, an adjusted basis of $40, and is subject to a apply to any liability incurred or the extent that a partnership uses this nonrecourse liability of $70. Immediately assumed by a partnership prior to additional method and the entire after the initial contributions, PRS refinances October 31, 2000. Nevertheless, § 1.752– amount of the excess nonrecourse the two separate liabilities with a single $120 3(a)(3) fifth, sixth, and seventh liability is not allocated to the nonrecourse liability. All of the built-in gain sentences, (b), and (c) Example 3, may contributing partner, the partnership attributable to Property X ($30) and Property be relied upon for any liability incurred must allocate the remaining amount of Y ($80) is section 704(c) gain allocable to B. or assumed by a partnership prior to the excess nonrecourse liability under (ii) The amount of the nonrecourse liability October 31, 2000 for taxable years one of the other methods in this ($120) is less than the total book value of all of the properties that are subject to such paragraph (a)(3). * * * ending on or after October 31, 2000. liability ($70 + $120 = $190), so there is no *** (b) Allocation of a single nonrecourse partnership minimum gain. § 1.704–2(d). liability among multiple properties—(1) Accordingly, no portion of the liability is * * * * * In general. For purposes of determining allocated pursuant to paragraph (a)(1) of this Approved: October 11, 2000. the amount of taxable gain under section. David A. Mader, paragraph (a)(2) of this section, if a (iii) Pursuant to paragraph (b)(1) of this partnership holds multiple properties section, PRS decides to allocate the Acting Deputy Commissioner of Internal subject to a single nonrecourse liability, nonrecourse liability evenly between the Revenue. Properties X and Y. Accordingly, each of Jonathan Talisman, the partnership may allocate the Properties X and Y are treated as being liability among the multiple properties subject to a separate $60 nonrecourse liability Acting Assistant Secretary of the Treasury. under any reasonable method. A for purposes of applying paragraph (a)(2) of [FR Doc. 00–27826 Filed 10–30–00; 8:45 am] method is not reasonable if it allocates this section. Under paragraph (a)(2) of this BILLING CODE 4830±01±U to any item of property an amount of the section, B will be allocated $20 of the
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DEPARTMENT OF TRANSPORTATION Newtown Creek is mostly commercial closures are of short duration and on vessels that normally pass under the Sunday when there have been few Coast Guard draws without openings. The requests to open these bridges. commercial vessels that do require Small Entities 33 CFR Part 117 openings are work barges that do not Under the Regulatory Flexibility Act [CGD01±00±223] operate on Sundays. (5 U.S.C. 601–612) we considered RIN 2115±AE47 Background and Purpose whether this temporary final rule would The Willis Avenue Bridge, mile 1.5, have a significant economic impact on Drawbridge Operation Regulations: across the Harlem River has a vertical a substantial number of small entities. Harlem River, Newtown Creek, NY clearance of 24 feet at mean high water ‘‘Small entities’’ comprises small AGENCY: Coast Guard, DOT. (MHW) and 30 feet at mean low water businesses, not-for-profit organizations (MLW) in the closed position. The that are independently owned and ACTION: Temporary final rule. Madison Avenue Bridge, mile 2.3, operated and are not dominant in their SUMMARY: The Coast Guard is across the Harlem River has a vertical fields, and governmental jurisdictions establishing a temporary final rule clearance of 25 feet at MHW and 29 feet with populations less than 50,000. governing the operation of the Willis at MLW in the closed position. The The Coast Guard certifies under 5 Avenue Bridge, mile 1.5, and the Pulaski Bridge across Newtown Creek, U.S.C. 605(b) that this rule will not have Madison Avenue Bridge, mile 2.3, both mile 0.6, has a vertical clearance of 39 a significant economic impact on a across the Harlem River, and the Pulaski feet at MHW and 43 feet at MLW in the substantial number of small entities. Bridge, mile 0.6, across Newtown Creek closed position. This conclusion is based on the fact that in New York City, New York. This The current operating regulations for the bridge closures are of short duration temporary final rule allows the bridge the Willis Avenue and Madison Avenue and on Sunday when there have been owner to close the above three bridges bridges, listed at 33 CFR 117.789(c), few requests to open these bridges. require the bridges to open on signal on November 5, 2000, for public safety Collection of Information and to facilitate a public function, the from 10 a.m. to 5 p.m., if at least four- running of the New York City Marathon. hours notice is given. The current This temporary final rule does not operating regulations for the Pulaski provide for a collection of information DATES: This temporary final rule is Bridge listed at 117.801(g) require it to under the Paperwork Reduction Act of effective on November 5, 2000. open on signal if at least a two-hour 1995 (44 U.S.C. 3501 et seq.). ADDRESSES: Documents as indicated in advance notice is given. this preamble are available for The bridge owner, New York City Federalism inspection or copying at the First Coast Department of Transportation The Coast Guard has analyzed this Guard District Office, 408 Atlantic (NYCDOT), requested a temporary temporary final rule in accordance with Avenue, Boston, Massachusetts 02110, 7 change to the operating regulations the principles and criteria contained in a.m. to 3 p.m., Monday through Friday, governing the Willis Avenue Bridge, the Executive Order 12612 and has except Federal holidays. The telephone Madison Avenue Bridge, and the determined that this temporary final number is (617) 223–8364. Pulaski Bridge, to allow the bridges to rule does not have sufficient federalism FOR FURTHER INFORMATION CONTACT: Joe remain in the closed position as follows: implications to warrant the preparation Arca, Supervisory Bridge Management Willis Avenue and Madison Avenue of a Federalism Assessment. Specialist, at (212) 668–7165. bridges from 10 a.m. to 5 p.m.; Pulaski Environment SUPPLEMENTARY INFORMATION: Bridge from 10:30 a.m. to 3 p.m. This action is necessary on November 5, The Coast Guard considered the Regulatory History 2000, to facilitate the running of the environmental impact of this temporary Pursuant to 5 U.S.C. 553, a notice of New York City Marathon. Vessels that final rule and concluded that, under proposed rulemaking (NPRM) was not can pass under the bridges without Section 2.B.2., Figure 2–1, paragraph published for this regulation. Good bridge openings may do so at all times (32)(e), of Commandant Instruction cause exists for not publishing a NPRM during these bridge closures. M16475.1C, this temporary final rule is and for making this regulation effective categorically excluded from further in less than 30 days after publication in Regulatory Evaluation environmental documentation because the Federal Register. Information about This temporary final rule is not a promulgation of changes to drawbridge the New York City Marathon was not significant regulatory action under regulations have been found not to have provided to the Coast Guard until section 3(f) of Executive Order 12866 a significant effect on the environment. September 20, 2000, making it and does not require an assessment of A written ‘‘Categorical Exclusion impossible to draft or publish a NPRM. potential costs and benefits under Determination’’ is not required for this Under 5 U.S.C. 553(d)(3), the Coast section 6(a)(3) of that Order. It has not temporary final rule. Guard finds that good cause exists for been reviewed by the Office of List of Subjects in 33 CFR Part 117 making this rule effective less than 30 Management and Budget under that days after publication in the Federal Order. It is not significant under the Bridges. Register. Any delay encountered in this regulatory policies and procedures of Regulations regulation’s effective date would be the Department of Transportation (DOT) unnecessary and contrary to the public (44 FR 11040; Feb. 26, 1979). The Coast For the reasons set out in the interest since immediate action is Guard expects the economic impact of preamble, the Coast Guard amends 33 needed to close the bridge in order to this temporary final rule to be so CFR part 117 as follows: provide for public safety and the safety minimal that a full Regulatory PART 117ÐDRAWBRIDGE of marathon participants. This closure is Evaluation under paragraph 10e of the OPERATION REGULATIONS not expected to have a significant regulatory policies and procedures of impact on navigation because vessel DOT is unnecessary. This conclusion is 1. The authority citation for part 117 traffic on the Harlem River and based on the fact that the requested continues to read as follows:
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Authority: 33 U.S.C. 499; 49 CFR 1.46; 33 National Exchange Carrier Association, We agree with NECA that changes in CFR 1.05–1(g); section 117.255 also issued Inc. (NECA) of any changes in their tariff notification periods and under the authority of Pub. L. 102–587, 106 participation in the association’s access advancements in data collection and Stat. 5039. tariff filing. Previously, incumbent local processing methods warrant a shorter 2. On November 5, 2000, from 10 a.m. exchange carriers were required to timeframe for carriers to provide notice to 5 p.m., in § 117.789, paragraph(c) is notify NECA of any change in their of tariff participation changes. In temporarily suspended and a new participation in the association’s access addition, as NECA noted in its petition, paragraph(g) is temporarily added to tariff by December 31 of the year shorter notice periods will not read as follows: preceding the tariff filing. The disadvantage NECA and may help § 117.789 Harlem River Commission is amending its rules to smaller companies make better- extend that notification deadline to informed decisions regarding tariff * * * * * participation. For instance, because the (g) The draws of the bridges at 103rd March 1 of the tariff year. This change will provide carriers with additional deadline by which NECA must file Street, mile 0.0, 3rd Avenue, mile 1.9, proposed revisions to its average 145th Street, mile 2.8, Macombs Dam, time in which to make their access tariff participation decisions. schedule formulas is December 31, mile 3.2, 207th Street, mile 6.0, and the companies that rely on these formulas to DATES: Effective November 30, 2000. two Broadway Bridges, mile 6.8, shall compute interstate access compensation open on signal if at least four-hours ADDRESSES: Federal Communications will have more time to analyze the notice is given to the New York City Commission, 445 12th Street SW., proposed revisions before deciding Highway Radio (Hotline) Room. The Washington, DC 20554. whether to participate in NECA’s access Willis Avenue Bridge, mile 1.5, and FOR FURTHER INFORMATION CONTACT: tariff. Madison Avenue Bridge, mile 2.3, need Jennifer McKee, (202) 418–1520. Therefore, we amend 47 CFR part 69 not open for vessel traffic from 10 a.m. to allow carriers until March 1 of each to 5 p.m. SUPPLEMENTARY INFORMATION: Under 47 CFR 69.3, NECA is responsible for filing tariff year to notify NECA of any 3. On November 5, 2000, from 10 a.m. changes in tariff participation. to 5 p.m., in § 117.801, paragraph (g) is an access service tariff as agent for all temporarily suspended and a new telephone companies that participate in Paperwork Reduction Act Analysis paragraph (h) is added to read as the association tariff. The association The action contained herein has been follows: tariff is to be filed with a scheduled analyzed with respect to the Paperwork effective date of July 1. To provide Reduction Act of 1995 and found not to § 117.801 Newtown Creek, Dutch Kills, NECA with sufficient notice, carriers impose new or modified reporting and English Kills, and their tributaries. were required to notify NECA of any recordkeeping requirements or burdens * * * * * change in their association tariff on the public. Therefore (h) The draw of the Pulaski Bridge, participation by December 31 of the year implementation of the amended rule mile 0.6, across Newtown Creek, need preceding the filing of the tariff. extending the date by which carriers not open for vessel traffic, from 10 a.m. In 1997 the Commission streamlined must notify NECA of changes in their to 5 p.m. The Greenpoint Avenue its tariff filing rules, allowing carriers to association access tariff participation Bridge, mile 1.3, across Newtown Creek file their annual access tariffs on 15 will not be subject to approval by the between Brooklyn and Queens, shall days notice for filings that include rate Office of Management and Budget open on signal if at least a two-hour increases, or on 7 days notice for filings (OMB). advance notice is given to the New York that include only rate decreases, rather City Department of Transportation than on 90 days notice. 63 FR 13132, Final Regulatory Flexibility Act (NYCDOT) Radio Hotline or NYCDOT March 18, 1998. The streamlined notice Analysis Bridge Operations Office. requirement applies to NECA’s As required by the Regulatory Dated: October 18, 2000. association access service tariff, Flexibility Act (RFA), 5 U.S.C. 603, an G.N. Naccara, allowing NECA to file the tariff on June Initial Regulatory Flexibility Analysis 16 or June 24, rather than on April 2, for Rear Admiral, U.S. Coast Guard, Commander, (IRFA) was incorporated in the NPRM. First Coast Guard District. an effective date of July 1. In addition The RFA, 5 U.S.C. 601 et. seq., has been to the streamlined notice period, NECA [FR Doc. 00–27942 Filed 10–30–00; 8:45 am] amended by the Contract With America now employs electronic data collection Advancement Act of 1996, Public Law BILLING CODE 4910±15±P and processing routines that were not in 104–121, 110 Stat. 847 (1996) use when 47 CFR 69.3 was adopted. (CWAAA). Title II of the CWAAA is the These more efficient data collection Small Business Regulatory Enforcement FEDERAL COMMUNICATIONS techniques significantly reduce the time Fairness Act of 1996 (SBREFA). The COMMISSION required to assemble and analyze data Commission sought written public 47 CFR Part 69 for NECA’s tariff filing. According to comment on the proposals in the NPRM, NECA, the tariff streamlining rules and including comment on the IRFA. This [CC Docket No. 99±316; FCC 00±384] improvements in data collection present Final Regulatory Flexibility management eliminate the need for Analysis (FRFA) conforms to the RFA, Shortening Notice Period for Changes carriers to provide six months advance as amended. See 5 U.S.C. 604. in Participation in NECA's Access notice to NECA of planned tariff Need for and Objectives of This Tariffs participation changes. Therefore, NECA Order. As discussed above, NECA has AGENCY: Federal Communications filed a petition for rulemaking seeking asserted that changes in tariff Commission. to change the carrier notification date notification periods and advancements ACTION: Final rule. from December 31 of the previous year in data collection and processing to March 1 of the tariff year. We granted methods have facilitated NECA’s ability SUMMARY: This document amends the NECA’s petition and sought comment to prepare association tariffs. Therefore, Commission’s rules to change the date on the proposal. 65 FR 51572, August NECA can receive notifications from by which carriers must notify the 24, 2000. carriers changing the status of their
VerDate 112000 15:45 Oct 30, 2000 Jkt 194001 PO 00000 Frm 00012 Fmt 4700 Sfmt 4700 E:\FR\FM\31OCR1.SGM pfrm11 PsN: 31OCR1 Federal Register / Vol. 65, No. 211 / Tuesday, October 31, 2000 / Rules and Regulations 64893 association tariff participation closer to pertinent small business size standard Statistics of Communications Common the tariff filing deadline. At NECA’s (e.g., a telephone communications Carriers (SOCC) lists 32 incumbent request, the Commission is amending its business having 1,500 or fewer LECs that have more than 1,500 rules to extend the deadline by which employees), and ‘‘is not dominant in its employees. We do not have data carriers must notify NECA of changes in field of operation.’’ 5 U.S.C. 601(3). The specifying the number of incumbent association tariff participation. SBA’s Office of Advocacy contends that, LECs that are either dominant in their Specifically, the notification deadline is for RFA purposes, small incumbent field of operations or are not changed from December 31 of the LECs are not dominant in their field of independently owned and operated, and preceding year to March 1 of the tariff operation because any such dominance thus are unable at this time to estimate year. This extension of the notification is not ‘‘national’’ in scope. Letter from with greater precision the number of deadline will provide carriers additional Jere W. Glover, Chief Counsel for incumbent LECs that would qualify as time to determine their tariff Advocacy, SBA, to William E. Kennard, small business concerns under the participation status, thus allowing them Chairman, FCC (May 27, 1999). The SBA’s definition. Consequently, we to make more informed tariff Small Business Act contains a definition estimate that fewer than 1,316 participation decisions. of ‘‘small business concern’’ which the incumbent LECs are small entities that Summary of Significant Issues Raised RFA incorporates into its own definition may be affected by the rules. by the Public Comments in Response to of ‘‘small business.’’ See 15 U.S.C. Description of Projected Reporting, the IRFA. The Commission received no 632(a) (Small Business Act); 5 U.S.C. Recordkeeping, and Other Compliance comments addressing the IRFA. 601(3) (RFA). SBA regulations interpret Requirements. This Order adopts a However, the comments received in ‘‘small business concern’’ to include the proposed extension of the date by which response to the NPRM were supportive concept of dominance on a national carriers must notify NECA of changes in of the change in tariff participation basis. 13 CFR 121.102(b). Since 1996, participation in association tariffs. notification date. NTCA’s comments out of an abundance of caution, the Under the current rules this notification specifically noted that changing the Commission has included small must be provided six months prior to election deadline to March 1 would incumbent LECs in its regulatory the effective date of the tariff, by benefit NTCA’s members, which are flexibility analyses. See, e.g., December 31 of the preceding year. The small carriers that are ‘‘rural telephone Implementation of the Local Commission amends its rules to allow companies’’ as defined in the Competition Provisions of the carriers until March 1 of the tariff year Telecommunications Act of 1996. Telecommunications Act of 1996, 61 FR to provide the required notification to Description and Estimate of the 45476, August 29, 1996. We have NECA. The amended rules will not Number of Small Entities to Which the therefore included small incumbent require carriers to conduct any new Proposed Rules Will Apply. The RFA LECs in this RFA analysis, although we reporting or recordkeeping obligations. directs agencies to provide a description emphasize that this RFA action has no Instead, carriers will continue to report of, and, where feasible, an estimate of effect on the Commission’s analyses and to NECA any changes in their the number of small entities to which determinations in other, non-RFA association tariff participation, but this the rules will apply. 5 U.S.C. 604(a)(3). contexts. notification will be submitted at a later The RFA defines the term ‘‘small entity’’ The most reliable source of date. as having the same meaning as the terms information regarding the total numbers Steps Taken To Minimize Significant ‘‘small business,’’ ‘‘small organization,’’ of certain common carrier and related Economic Impact on Small Entities and and ‘‘small business concern’’ under providers nationwide, as well as the Significant Alternatives Considered. The Section 3 of the Small Business Act. 5 numbers of commercial wireless rule amendments adopted in this Order U.S.C. 601(3). A small business concern entities, appears to be data the are designed to assist all carriers in is one which: (1) Is independently Commission publishes annually in its making their association tariff owned and operated; (2) is not Carrier Locator: Interstate Service participation elections. The extension of dominant in its field of operation; and Providers Report (Locator). This report the notification date from December 31 (3) satisfies any additional criteria was compiled using information from to March 1 may particularly benefit established by the Small Business Telecommunications Relay Service smaller carriers that rely on average Administration (SBA). Small Business (TRS) fund worksheets filed by carriers, schedule formulas to compute interstate Act, 15 U.S.C. 632. including, inter alia, LECs, competitive access compensation, because NECA is In this FRFA, we consider the local exchange carriers, interexchange required to file proposed revisions to potential impact of the Order on all carriers, competitive access providers, these schedules by December 31. The local exchange carriers (LECs) that satellite service providers, wireless extension of the tariff election deadline could consider participating in NECA’s telephony providers, operator service will provide carriers more time to association tariffs. Neither the providers, pay telephone operators, analyze NECA’s proposed revisions Commission nor the SBA has developed providers of telephone toll service, before making tariff participation a definition for small LECs. The closest providers of telephone exchange decisions. applicable definition under the SBA service, and resellers. Report to Congress. The Commission rules is for Standard Industrial There are two principle providers of will send a copy of the Order, including Classification (SIC) category 4,813, local telephone service; incumbent LECs this FRFA, in a report to be sent to telephone communications companies and competing local service providers. Congress pursuant to the Small Business other than radiotelephone (wireless) However, under 47 CFR part 69, Regulatory Enforcement Fairness Act of companies. 13 CFR 121.201. For this participation in NECA’s access service 1996. See 5 U.S.C. 801(a)(1)(A). In category, the SBA has defined a small tariffs is limited to incumbent LECs, addition, the Commission will send a business to be a small entity having no therefore the rule changes will not affect copy of the Order, including this FRFA, more than 1,500 employees. Id. competing local service providers. 47 to the Chief Counsel for Advocacy of the We have included small incumbent CFR 69.2(hh). According to the most Small Business Administration. A copy LECs in the present RFA analysis. As recent Locator data, 1,348 filers of the Order and FRFA (or summaries noted, a ‘‘small business’’ under the identified themselves as incumbent thereof) will also be published in the RFA is one that, inter alia, meets the LECs. Data set forth in the Commission’s Federal Register. See 5 U.S.C. 604(b).
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Ordering Clauses tariff becomes effective that it will no DATES: Effective October 29, 2000, Pursuant to the authority contained in longer participate in the association through April 24, 2001. sections 1, 4(i), 4(j), 201–205, and 303 tariff. A telephone company or group of ADDRESSES: Copies of documents of the Communications Act of 1934, as affiliated telephone companies that supporting this action are available from amended, 47 U.S.C. 151, 154(i), 154(j), elects to file its own Carrier Common the Northeast Regional Office, NMFS, 201–205, and 303, that this Order Is Line tariff for one of its study areas shall Office of Sustainable Fisheries, 1 Hereby Adopted as described. file its own Carrier Common Line Blackburn Drive, Gloucester, MA 01930. The provisions of this Order Shall Be tariff(s) for all of its study areas. FOR FURTHER INFORMATION CONTACT: Effective November 30, 2000. * * * * * Peter W. Christopher, Fishery Policy The Commission’s Consumer (i) * * * Analyst, 978–281–9288, fax 978–281– Information Bureau, Reference (1) In addition to the withdrawal 9135, e-mail Information Center, Shall Send a copy provisions of paragraphs (e)(6) and (e)(9) [email protected]. of this section, a telephone company or of this Order, including the Final SUPPLEMENTARY INFORMATION: The Spiny Regulatory Flexibility Analysis, to the group of affiliated companies that Dogfish Fishery Management Plan Chief Counsel for Advocacy of the Small participates in one or more association (FMP) prepared by the Mid-Atlantic and Business Administration. tariffs during the current tariff year and New England Fishery Management that elects to file price cap tariffs or List of Subjects in 47 CFR Part 69 Councils (Councils) was partially optional incentive regulation tariffs approved by NMFS on behalf of the Communications common carriers, effective July 1 of the following tariff Secretary of Commerce (Secretary) on Tariffs. year shall notify the association by September 29, 1999. The final rule Federal Communications Commission. March 1 of the following tariff year that implementing the FMP was published Magalie Roman Salas, it is withdrawing from association on January 11, 2000 (65 FR 1557), and tariffs, subject to the terms of this Secretary. was initially scheduled to be effective section, to participate in price cap on February 10, 2000. However, the Regulatory Text regulation or optional incentive Councils were unable to reach regulation. For the reasons stated in the agreement on a preferred commercial preamble, the Federal Communications * * * * * quota and trip limit measure for this Commission amends 47 CFR part 69 as [FR Doc. 00–27904 Filed 10–30–00; 8:45 am] action. After delays in implementing the follows: BILLING CODE 6712±01±P FMP from February to April, 2000, in order to provide the Councils additional PART 69ÐACCESS CHARGES opportunities to reach agreement, NMFS, on behalf of the Secretary, 1. The authority citation for part 69 DEPARTMENT OF COMMERCE published an interim rule on May 4, continues to read as follows: National Oceanic and Atmospheric 2000 (65 FR 25887), which established Authority: 47 U.S.C. 154, 201, 202, 203, Administration a quota and trip limits for fishing year 205, 218, 220, 254, 403. 2000. 2. Amend § 69.3 by revising 50 CFR Part 648 The interim rule allocated quota into two periods (May 1 through October 31, paragraphs (e)(6), (e)(9), and (i)(1) to [Docket No. 000426114±0114±01; I.D. read as follows: 101700E] and November 1 through April 30), with trip limits intended to preclude directed § 69.3 Filing of access service tariffs. RIN 0648±AN53 fishing. As of September 23, 2000, * * * * * reported landings have exceeded the (e) * * * Fisheries of the Northeastern United annual quota of 4 million lb (1,814 mt), (6) A telephone company or States; Spiny Dogfish Fishery; 2000 with approximately 4.7 million lb (2,131 companies that elect to file such a tariff Specifications; Extension of an Interim mt) reported. In addition, the shall notify the association not later Rule Commonwealth of Massachusetts closed than March 1 of the year the tariff AGENCY: National Marine Fisheries its waters to spiny dogfish fishing on becomes effective, if such company or Service (NMFS), National Oceanic and August 26, 2000, based on its companies did not file such a tariff in Atmospheric Administration (NOAA), determination that landings in that state the preceding biennial period or cross- Commerce. reached the 7 million lb (3,175 mt) of reference association charges in such ACTION: Extension of the effective date spiny dogfish that the Commonwealth preceding period that will be cross- of an interim rule. believed appropriate. Therefore, the referenced in the new tariff. A telephone landings of 4.6 million lb (2,086 mt) company or companies that elect to file SUMMARY: NMFS informs the public that currently included in Federal landings such a tariff not in the biennial period the interim rule published on May 4, records is incomplete. Due to the shall file its tariff to become effective 2000, to implement specifications and excessive landings in quota period 1, July 1 for a period of one year. seasonal trip limits for fishing year 2000 which have exceeded the annual quota, Thereafter, such telephone company or (May 1, 2000, through April 30, 2001) the fishery will not be reopened for companies must file its tariff pursuant for the spiny dogfish (Squalus quota period 2. to paragraphs (f)(1) or (f)(2) of this acanthias) fishery, is extended through The research quota set–-aside of section. April 24, 2001. The extension maintains 500,000 lb (226.7 mt) was established * * * * * the total quota for the 2000 fishing year for vessels participating in research (9) A telephone company or group of and sets aside a portion of the total projects designed to improve selectivity affiliated telephone companies that quota for vessels participating in spiny of spiny dogfish fishing gear and elects to file its own Carrier Common dogfish exempted fishing projects. The methods. The primary goal in providing Line tariff pursuant to paragraph (a) of interim final rule is necessary to prevent this incentive for research is to this section shall notify the association overfishing of spiny dogfish and extend investigate ways to shift fishing effort not later than March 1 of the year the the effective period of the quota. away from female spiny dogfish, which
VerDate 112000 15:45 Oct 30, 2000 Jkt 194001 PO 00000 Frm 00014 Fmt 4700 Sfmt 4700 E:\FR\FM\31OCR1.SGM pfrm11 PsN: 31OCR1 Federal Register / Vol. 65, No. 211 / Tuesday, October 31, 2000 / Rules and Regulations 64895 in turn would help to rebuild the female believes that a lack of information on Magnuson-Stevens Act. Further, the portion of the stock and to provide the fishery and the stock status MADMF believes that the small-scale greater rebuilding capacity to the stock continues to be a problem with the directed fishery would reduce discards as a whole. In addition, spiny dogfish interim final rule. The commentor while allowing the processing sector to gear selectivity research would believes that some NMFS analyses maintain its infrastructure. contribute to improving current indicate that the level of discards of Response: The MADMF management information on the species, including spiny dogfish in non–directed fisheries strategy does not eliminate overfishing bycatch and discard mortality. This would be so great that it would cause as required by the FMP because it does measure will remain in place for quota the FMP measures to fail. The not result in a fishing mortality rate of period 2 to allow for this research. commentor stated that the experimental F = 0.03 or less. The Spiny Dogfish fishery quota set-aside was an attempt to Technical Committee is continuing to Comments and Responses shield the lack of substantive evaluate alternative management Comment 1: Two commenters felt that information that is usually required to approaches and will consider updated measures other than those in the interim establish an FMP and an attempt to stock status information. The Spiny rule would be more fair. One stated that indicate to the industry that serious Dogfish Joint Committee and the the interim final rule measures are work will be done to support changes in Councils may consider the new unfair to gillnet vessels and that the plan that would forestall the closure information and new alternatives in management measures such as weekly of directed harvesting and the 2001 in an amendment to the FMP. An trip limits, individual quotas based on consequent loss of markets. FMP amendment would be necessary to vessel history, and a minimum mesh Response: The need for restrictive modify the rebuilding program in the size of 7 inches (17.8 cm) would reduce management measures for spiny dogfish FMP. discarding. Another commentor stated was established in the FMP. The Authority: 16 U.S.C. 1801 et seq. that the shutdown of the directed spiny Secretary delayed implementation of the dogfish fishery would eliminate a FMP in order for the Councils to Dated: October 25, 2000. portion of his vessel’s income for a part consider additional information and to William T. Hogarth, of the year. reach an agreement on management Deputy Assistant Administrator for Fisheries, Response: Management alternatives measures for the 2000 fishing year. National Marine Fisheries Service. were considered during the When the Councils failed to come to an [FR Doc. 00–27867 Filed 10–26–00; 1:08 pm] development of the annual agreement, the Secretary implemented BILLING CODE 3510±22±S specifications for the spiny dogfish the interim final rule to be consistent fishery and in the interim final rule. with the FMP and to end overfishing. As Individual quotas were not considered required by the Magnuson-Stevens Act, DEPARTMENT OF COMMERCE by the Councils when the Spiny Dogfish the FMP and the interim final rule are FMP was under development because of based on the best available scientific National Oceanic and Atmospheric a moratorium enacted by Congress in information and on established Administration section 303(d) of the Magnuson–Stevens measures to end overfishing on spiny Fishery Conservation and Management dogfish. While an analysis prepared by 50 CFR Part 679 Act that prohibited the development of NMFS does indicate that a high amount [Docket No. 991210329±0273±02; I.D. management options involving of spiny dogfish discards is possible 102699B] individual quotas through October 1, with low trip limits, it does not indicate RIN 0648±AM36 2000, pending a study of individual that such discards compromise the transferable quotas by the National rebuilding plan established in the FMP. Fisheries of the Exclusive Economic Research Council. Other management The trip limit analysis was unable to Zone Off Alaska; Bering Sea and alternatives were determined to be quantify the expected changes in fishing Aleutian Islands Area; Amendment 58 either unlikely to achieve the necessary practices by fishermen to avoid spiny to Revise the Chinook Salmon Savings conservation targets or infeasible. For dogfish due to low trip limits. Also, low Area; Correction example, mesh-size restrictions may not trip limits essentially eliminate the provide the necessary conservation directed spiny dogfish fishery, thereby AGENCY: National Marine Fisheries benefits because, while the larger mesh preventing the high amount of discards Service (NMFS), National Oceanic and size may exclude juvenile spiny dogfish, of small spiny dogfish known to be Atmospheric Administration (NOAA), it would still capture the larger female associated with the directed spiny Commerce. spiny dogfish, which are of special dogfish fishery. The research set-aside ACTION: Final rule; correction. concern to the reproductive capacity of encourages industry and researchers to the stock. The interim final rule improve selectivity of spiny dogfish gear SUMMARY: This document corrects implemented measures to end and methods. regulatory text in the final rule that overfishing while providing the greatest Comment 3: The Massachusetts implements Amendment 58 to the future benefits to the fishing Division of Marine Fisheries (MADMF) Fishery Management Plan for the communities, based on the available commented on the rationale behind the Groundfish Fishery of the Bering Sea information. In the future, the Councils management measures implemented in and Aleutian Islands Area (FMP), which are expected to consider additional Massachusetts shortly before the interim was published in the Federal Registeron alternatives designed to reduce bycatch final rule was implemented. In late October 12, 2000. of spiny dogfish in other fisheries and April, the MADMF implemented a 7- DATES: Effective November 13, 2000. to mitigate short–-erm economic million lb (3,175-mt) quota, a 7,000-lb FOR FURTHER INFORMATION CONTACT: hardships, as requested by the (3,175-kg) trip limit, a 31-inch (78.7-cm) Patsy A. Bearden, 907–586–7008. Secretary. minimum fish size, and gillnet SUPPLEMENTARY INFORMATION: Comment 2: One commentor restrictions. The MADMF believes that reiterated its concerns expressed during these measures allow a small-scale Background the comment period of the proposed directed fishery while remaining A final rule was published in the rule for the FMP. The commentor consistent with the FMP and the Federal Register on October 12, 2000
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(65 FR 60587), to implement DEPARTMENT OF COMMERCE Virginia waters and issued regulations Amendment 58 to the FMP. In the prohibiting the possession of horseshoe regulatory text portion of the final rule, National Oceanic and Atmospheric crabs in Virginia waters and the landing a reference to Figure 8a and Figure 8b Administration of horseshoe crabs in Virginia, were inadvertently omitted from the regardless of where they were caught. revised definition for ‘‘Chinook Salmon 50 CFR Part 697 Details were provided in the October 16, Savings Area of the BSAI.’’ Also, the [Docket No. 00824246Ð0294Ð03; I.D. 2000, Federal Register document and paragraph designations were incorrectly 062700F] are not repeated here. On October 20, labeled for § 679.21(e)7)(viii). 2000, the Secretary stayed the effective RIN 0648±AO33 date of the moratorium and associated Correction regulations until October 27, 2000, Horseshoe Crab; Interstate Fishery In the final rule to implement because Virginia was in the process of Management Plans; Cancellation of implementing regulations to reduce its Amendment 58 to the FMP, which Moratorium revises the Chinook Salmon Savings horseshoe crab quota. This stay was Area, published at 65 FR 60587, October AGENCY: National Marine Fisheries filed on October 20, 2000, at the Office 12, 2000, FR Doc. 00–26086, the Service (NMFS), National Oceanic and of the Federal Register, effective following corrections are made: Atmospheric Administration (NOAA), October 23, 2000, and published in the Commerce. Federal Register on October 24, 2000 § 679.2 [Corrected] ACTION: Cancellation of Federal (65 FR 63550). moratorium; final rule. The Act specifies that, if, after a 1. On page 60588, column 2, § 679.2, moratorium is declared with respect to the definition for ‘‘Chinook Salmon SUMMARY: The Secretary of Commerce a State, the Secretary is notified by the Savings Area of the BSAI’’ is corrected (Secretary) announces the cancellation Commission that it is withdrawing the to read: ‘‘Chinook Salmon Savings Area of the Federal moratorium on fishing for determination of noncompliance, the of the BSAI (see § 679.21(e)(7)(viii) and horseshoe crabs in the Commonwealth Secretary shall immediately determine Figure 8a and Figure 8b to this part).’’ of Virginia (Virginia) waters and the whether the State is in compliance with 2. On page 60588, column three, § removal of regulations prohibiting the the applicable plan. If the State is 679.21 (e)(7)(viii) is correctly revised to possession of horseshoe crabs in determined to be in compliance, the read as follows: Virginia waters and the landing of moratorium shall be terminated. horseshoe crabs in Virginia, regardless Activities Pursuant to the Act § 679.21 Prohibited species bycatch of where they were caught. The management. Secretary cancelled the moratorium, as On October 20, 2000, the Secretary * * * * * required by the Atlantic Coastal received a letter from the Commission (e) * * * Fisheries Cooperative Management Act prepared pursuant to the Act. The Commission’s letter stated that Virginia (7) * * * (Act), based on his determination that Virginia is now in compliance with the had taken corrective action to comply (viii) Chinook salmon. If, during the Atlantic States Marine Fisheries with Addendum 1 to the Commission’s fishing year, the Regional Administrator Commission’s (Commission) Interstate ISFMP for horseshoe crabs, and, determines that catch of chinook Fishery Management Plan (ISFMP) for therefore, the Commission was salmon, by vessels using trawl gear horseshoe crabs. withdrawing its determination of while directed fishing for pollock in the noncompliance. DATES: Effective October 26, 2000. BSAI, will reach the annual limit as FOR FURTHER INFORMATION CONTACT: Cancellation of the Moratorium identified in paragraph (e)(1)(vii) of this section, NMFS, by notification in the Richard H. Schaefer, Chief, Staff Office Based on the Commission’s October Federal Register will close the Chinook for Intergovernmental and Recreational 20, 2000, letter, information received Salmon Savings Area, as defined in Fisheries, NMFS, 301–427–2014. from the Virginia, and the Secretary’s Figure 8 to this part, to directed fishing SUPPLEMENTARY INFORMATION: review of Virginia’s revised regulations, which reduced its quota of horseshoe for pollock with trawl gear consistent Background with the following dates: crabs from 355,000 horseshoe crabs to On July 7, 2000, National Marine 152,495 horseshoe crabs as required by (A) From the effective date of the Fisheries Service (NMFS) determined Addendum 1, the Secretary concurs closure until April 15, and from that Virginia was not in compliance with the Commission’s determination September 1 through December 31, if with Addendum 1 to the Commission’s that Virginia is now in compliance with the Regional Administrator determines ISFMP for horseshoe crabs and that the Addendum 1 to the Commission’s that the annual limit of chinook salmon measure Virginia failed to implement is ISFMP for horseshoe crabs. Therefore, will be attained before April 15. necessary for the conservation of the the moratorium on fishing for horseshoe (B) From September 1 through fishery in question. Virginia was crabs in Virginia waters is cancelled, December 31, if the Regional notified by letter on July 11, 2000, of and the associated regulations removed. Administrator determines that the this determination, and that NMFS annual limit of chinook salmon will be required additional time to analyze the Changes from Interim Final Rule attained after April 15. timing and nature of the moratorium’s These changes were due to the * * * * * implementation before issuing a cancellation of the moratorium and declaration of a moratorium and a rule associated regulations. The definition of Dated: October 25, 2000. necessary to implement Section 806 of horseshoe crab in § 697.2 is removed, William T. Hogarth, the Act. and in § 697.7, paragraph (e) is Deputy Assistant Administrator for Fisheries, On October 16, 2000 (65 FR 61116), removed. This paragraph includes the National Marine Fisheries Service. the Secretary declared a Federal provision that it is unlawful for any [FR Doc. 00–27874 Filed 10–30–00; 8:45 am] moratorium effective October 23, 2000, person to possess horseshoe crabs in BILLING CODE 3510±22±S on fishing for horseshoe crabs in Virginia waters or land horseshoe crabs
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Proposed Rules Federal Register Vol. 65, No. 211
Tuesday, October 31, 2000
This section of the FEDERAL REGISTER Attention: Rules Docket No. 2000–NM– • For each issue, state what specific contains notices to the public of the proposed 142–AD, 1601 Lind Avenue, SW., change to the proposed AD is being issuance of rules and regulations. The Renton, Washington 98055–4056. requested. purpose of these notices is to give interested Comments may be inspected at this • Include justification (e.g., reasons or persons an opportunity to participate in the location between 9:00 a.m. and 3:00 data) for each request. rule making prior to the adoption of the final Comments are specifically invited on rules. p.m., Monday through Friday, except Federal holidays. the overall regulatory, economic, Comments may be submitted via fax environmental, and energy aspects of DEPARTMENT OF TRANSPORTATION to (425) 227–1232. Comments may also the proposed rule. All comments be sent via the Internet using the submitted will be available, both before Federal Aviation Administration following address: 9-anm- and after the closing date for comments, [email protected]. Comments sent in the Rules Docket for examination by 14 CFR Part 39 via fax or the Internet must contain interested persons. A report summarizing each FAA-public contact [Docket No. 2000±NM±142±AD] ‘‘Docket No. 2000–NM–142–AD’’ in the subject line and need not be submitted concerned with the substance of this RIN 2120±AA64 in triplicate. Comments sent via the proposal will be filed in the Rules Internet as attached electronic files must Docket. Airworthiness Directives; Bombardier be formatted in Microsoft Word 97 for Commenters wishing the FAA to Model CL±600±2B19 Series Airplanes Windows or ASCII text. acknowledge receipt of their comments submitted in response to this notice AGENCY: Federal Aviation The service information referenced in must submit a self-addressed, stamped Administration, DOT. the proposed rule may be obtained from Bombardier, Inc., Canadair, Aerospace postcard on which the following ACTION: Notice of proposed rulemaking statement is made: ‘‘Comments to (NPRM). Group, P.O. Box 6087 Station A, Montreal, Quebec H3C 3G9, Canada. Docket Number 2000–NM–142–AD.’’ SUMMARY: This document proposes the This information may be examined at The postcard will be date stamped and supersedure of an existing airworthiness the FAA, Transport Airplane returned to the commenter. directive (AD), applicable to certain Directorate, 1601 Lind Avenue, SW., Availability of NPRMs Bombardier Model CL–600–2B19 series Renton, Washington; and at the FAA, Any person may obtain a copy of this airplanes, that currently requires, among New York Aircraft Certification Office, NPRM by submitting a request to the other actions, certain revisions to the 10 Fifth Street, Third Floor, Valley FAA, Transport Airplane Directorate, Airplane Flight Manual (AFM); and Stream, New York. ANM–114, Attention: Rules Docket No. removal of all elevator flutter dampers. FOR FURTHER INFORMATION CONTACT: 2000–NM–142–AD, 1601 Lind Avenue, That AD also requires installation of Serge Napoleon, Aerospace Engineer, SW., Renton, Washington 98055–4056. new elevator flutter dampers, and ANE–171, FAA, New York Aircraft replacement of shear pins and shear Certification Office, 10 Fifth Street, Discussion links with new improved shear pins and Third Floor, Valley Stream, New York On February 12, 1998, the FAA issued shear links. This action would add 11581; telephone (516) 256–7512; fax AD 98–04–45, amendment 39–10356 (63 airplanes to the applicability of the (516) 568–2716. FR 9928, February 27, 1998), applicable existing AD; and would require SUPPLEMENTARY INFORMATION: to certain Bombardier Model CL–600– replacing certain shear pins with new, 2B19 series airplanes, to require improved shear pins; and, for certain Comments Invited revisions to the Airplane Flight Manual airplanes, inspecting of the maintenance Interested persons are invited to (AFM) to advise the flight crew of the records to determine replacement status participate in the making of the need to perform daily checks to verify of the shear pins; and corrective actions, proposed rule by submitting such proper operation of the elevator control if necessary. This proposal is prompted written data, views, or arguments as system, and to restrict altitude and by issuance of mandatory continuing they may desire. Communications shall airspeed operations under certain airworthiness information by a foreign identify the Rules Docket number and conditions. civil airworthiness authority. The be submitted in triplicate to the address That AD also requires removal of all actions specified by the proposed AD specified above. All communications elevator flutter dampers. That AD also are intended to prevent premature received on or before the closing date requires inspections of certain airplanes failure of the shear pins of the elevator for comments, specified above, will be to detect deformation or discrepancies damper, which may increase the considered before taking action on the of the flutter damper hinge fittings and likelihood of jamming or restricting proposed rule. The proposals contained lug of the horizontal stabilizer, the movement of the elevator and the in this notice may be changed in light elevator hinge/damper fitting, and the resultant adverse effect on of the comments received. shear pin lugs; and replacement of controllability of the airplane. Submit comments using the following discrepant parts with serviceable parts. DATES: Comments must be received by format: That AD also requires installation of November 30, 2000. • Organize comments issue-by-issue. new elevator flutter dampers, and ADDRESSES: Submit comments in For example, discuss a request to replacement of shear pins and shear triplicate to the Federal Aviation change the compliance time and a links with new, improved pins and Administration (FAA), Transport request to change the service bulletin links. That action was prompted by Airplane Directorate, ANM–114, reference as two separate issues. reports that the installation of certain
VerDate 112000 15:43 Oct 30, 2000 Jkt 194001 PO 00000 Frm 00001 Fmt 4702 Sfmt 4702 E:\FR\FM\31OCP1.SGM pfrm11 PsN: 31OCP1 Federal Register / Vol. 65, No. 211 / Tuesday, October 31, 2000 / Proposed Rules 64899 shear pins may jam or restrict provisions of section 21.29 of the The inspections that are currently movement of the elevator. The Federal Aviation Regulations (14 CFR required by AD 98–04–45, and retained requirements of that AD are intended to 21.29) and the applicable bilateral in this AD, take approximately 26 work prevent such jamming or restricting airworthiness agreement. Pursuant to hours per airplane to accomplish, at an movement of the elevator and the this bilateral airworthiness agreement, average labor rate of $60 per work hour. resultant adverse effect on the TCCA has kept the FAA informed of the Based on these figures, the cost impact controllability of the airplane. situation described above. The FAA has of the inspection requirements of AD examined the findings of TCCA, 98–04–05 is estimated to be $1,560 per Actions Since Issuance of Previous Rule reviewed all available information, and airplane. Transport Canada Civil Aviation determined that AD action is necessary The installation of flutter dampers (TCCA), which is the airworthiness for products of this type design that are that is currently required by AD 98–04– authority for Canada, has advised the certificated for operation in the United 45 takes approximately 12 work hours FAA that, in several cases, the new States. per airplane to accomplish, at an shear pins of the elevator flutter average labor rate of $60 per work hour. dampers have failed. These improved Explanation of Requirements of Required parts would be provided at no shear pins were installed, as required by Proposed Rule cost to the operators by the AD 98–04–45, and were intended to Since an unsafe condition has been manufacturer. Based on these figures the have a safe life limit of 20,000 flight identified that is likely to exist or cost impact of the installation currently cycles. However, in three cases, the develop on other airplanes of the same required AD 98–04–45 is estimated to be failed shear pins had all been in service type design registered in the United $720 per airplane. between 5,000 and 6,000 flight cycles. States, the proposed AD would The new actions (i.e., replacement of Investigation revealed that the failed supersede AD 98–04–45 to continue to the shear pins, check of maintainence shear pins did not meet the design require: records, and AFM revision) that are specifications due to a quality control • Revisions to the AFM to advise the proposed in this AD action would take problem (improper hardness of the flight crew of the need to perform daily approximately 21 work hours per pins). checks to verify proper operation of the airplane to accomplish, at an average elevator control system, and to restrict labor rate of $60 per work hour. Explanation of Relevant Service altitude and airspeed operations under Required parts are estimated to cost Information certain conditions; $801. Based on these figures, the cost The manufacturer has issued Canadair • Removal of all elevator flutter impact of these proposed requirements Regional Jet Service Bulletin S.B. 601R– dampers; of this AD on U.S. operators is estimated 27–100, Revision ‘A,’ dated March 10, • Inspections of certain airplanes to to be $441,054, or $2,061 per airplane. 2000, which describes procedures for detect deformation or discrepancies of The cost impact figures discussed the following: the flutter damper hinge fittings and lug above are based on assumptions that no • Part A of the Accomplishment of the horizontal stabilizer, the elevator operator has yet accomplished any of Instructions: For certain airplanes, hinge/damper fitting, and the shear pin the proposed requirements of this AD replacement of shear pins of the elevator lugs; action, and that no operator would flutter dampers with new, improved • Replacement of discrepant parts accomplish those actions in the future if shear pins. with serviceable parts; and this AD were not adopted. The cost • Parts B and C of the • Installation of new elevator flutter impact figures discussed in AD Accomplishment Instructions: For dampers. rulemaking actions represent only the certain other airplanes, inspection of the This new action would require adding time necessary to perform the specific maintenance records to determine the airplanes to the applicability of the actions actually required by the AD. replacement status of the shear pins of existing AD; replacing certain shear pins These figures typically do not include the elevator flutter dampers, and with new, improved shear pins; and, for incidental costs, such as the time replacement of certain shear pins with certain airplanes, inspecting the required to gain access and close up, new, improved shear pins. maintenance records to determine planning time, or time necessitated by The manufacturer also has issued replacement status of the shear pins, other administrative actions. Canadair Regional Jet Temporary and corrective actions, if necessary. The Regulatory Impact Revision RJ/68–1, dated February 15, actions would be required to be 2000, to the AFM. The temporary accomplished in accordance with the The regulations proposed herein revision describes procedures for re- service bulletin described previously. would not have a substantial direct introducing additional first-flight-of-the- effect on the States, on the relationship Cost Impact day checks of the elevator control between the national Government and system. These checks apply to certain There are approximately 214 the States, or on the distribution of airplanes on which the previously Bombardier Model CL–600–2B19 series power and responsibilities among the described service bulletin has not been airplanes of U.S. registry that would be various levels of government. Therefore, accomplished. affected by this proposed AD. it is determined that this proposal TCCA classified the service bulletin The removal of the elevator dampers would not have federalism implications as mandatory and issued Canadian and the AFM revision that are currently under Executive Order 13132. airworthiness directive CF–2000–10, required by AD 98–04–45, and retained For the reasons discussed above, I dated March 23, 2000, in order to assure in this AD, take approximately 6 hours certify that this proposed regulation (1) the continued airworthiness of these per airplane to accomplish, at an Is not a ‘‘significant regulatory action’’ airplanes in Canada. average rate of $60 per work hour. The under Executive Order 12866; (2) is not FAA estimates that all affected U.S. a ‘‘significant rule’’ under the DOT FAA’s Conclusions operators have previously accomplished Regulatory Policies and Procedures (44 This airplane model is manufactured these requirements, therefore, the future FR 11034, February 26, 1979); and (3) if in Canada and is type certificated for cost impact of these requirements is promulgated, will not have a significant operation in the United States under the minimal. economic impact, positive or negative,
VerDate 112000 15:43 Oct 30, 2000 Jkt 194001 PO 00000 Frm 00002 Fmt 4702 Sfmt 4702 E:\FR\FM\31OCP1.SGM pfrm11 PsN: 31OCP1 64900 Federal Register / Vol. 65, No. 211 / Tuesday, October 31, 2000 / Proposed Rules on a substantial number of small entities after January 26, 1994 (the effective date of (1) Elevator ...... Check .... Travel range (to under the criteria of the Regulatory AD 94–01–09, amendment 39–8791), revise approximately Flexibility Act. A copy of the draft the Limitations Section of the FAA-approved 1⁄2 travel) using each hydraulic regulatory evaluation prepared for this Airplane Flight Manual (AFM) to include the following restrictions of altitude and airspeed system in turn, action is contained in the Rules Docket. operations under conditions of single or with the other A copy of it may be obtained by double hydraulic system failure; and advise hydraulic sys- contacting the Rules Docket at the the flight crew of these revised limits. tems depressur- ized.’’ location provided under the caption Revision of the AFM may be accomplished ADDRESSES. by inserting a copy of this AD or AFM Restatement of Inspections Required by AD Revision 34, dated June 12, 1995, in the 98–04–45 List of Subjects in 14 CFR Part 39 AFM. Restrictions of altitude and airspeed (c) For airplanes having serial numbers Air transportation, Aircraft, Aviation operations under conditions of single or 7003 through 7049 inclusive: Within 12 safety, Safety. double hydraulic system failure are listed in months after April 3, 1998 (the effective date the following tables. of AD 98–04–45, amendment 39–10356), The Proposed Amendment perform the actions required in paragraphs Altitude limit Airspeed limit (c)(1), (c)(2), and (c)(3) of this AD, as Accordingly, pursuant to the (maximum) (maximum) authority delegated to me by the applicable, in accordance with Section 2.B., Administrator, the Federal Aviation Part A, of Canadair Regional Jet Service Single Hydraulic System Failure Bulletin S.B. 601R–27–040, Revision ‘B,’ Administration proposes to amend part dated September 11, 1995. 39 of the Federal Aviation Regulations 31,000 feet ...... 0.55 Mach (199 (1) Remove the shear pins and shear links (14 CFR part 39) as follows: KIAS). of the flutter dampers and perform a visual 30,000 feet ...... 0.55 Mach (204 inspection to detect any deformation or PART 39ÐAIRWORTHINESS KIAS). discrepancy of the flutter damper hinge DIRECTIVES 28,000 feet ...... 0.55 Mach (213 fitting and lug of the horizontal stabilizer. KIAS). Prior to further flight, replace any deformed 1. The authority citation for part 39 26,000 feet ...... 0.55 Mach (222 or discrepant part with a serviceable part in continues to read as follows: KIAS). accordance with the service bulletin. 24,000 feet ...... 0.55 Mach (232 Authority: 49 U.S.C. 106(g), 40113, 44701. (2) Perform a visual inspection to detect KIAS). any deformation or discrepancy of the § 39.13 [Amended] 22,000 feet ...... 0.55 Mach (241 elevator hinge/damper fitting and shear pin KIAS). lugs. Prior to further flight, replace any 2. Section 39.13 is amended by 20,000 feet and 252 KIAS. removing amendment 39–10356 (63 FR discrepant part with a serviceable part in below. accordance with the service bulletin. 9928, February 27, 1998), and by adding (3) Perform a fluorescent penetrant a new airworthiness directive (AD), to Double Hydraulic System Failure inspection and a dimensional inspection to read as follows: detect any deformation or discrepancy of the Bombardier, Inc. (Formerly Canadair): 10,000 feet ...... 200 KIAS. shear pin lugs. If any deformation or Docket 2000–NM–142–AD. Supersedes discrepancy is found on the lugs, prior to further flight, replace the elevator with a new AD 98–04–45, Amendment 39–10356. Note 2: The restrictions described in the or serviceable elevator in accordance with AFM Temporary Revision (TR) RJ/30, dated Applicability: Model CL–600–2B19 series the service bulletin. airplanes, having serial numbers 7003 December 16, 1993, meet the requirements of through 7357 inclusive, certificated in any this paragraph. Therefore, inserting a copy of Note 4: For the purposes of this AD, a category. TR RJ/30 in lieu of this AD in the AFM is detailed visual inspection is defined as: ‘‘An intensive visual examination of a specific Note 1: This AD applies to each airplane considered an acceptable means of compliance with this paragraph. structural area, system, installation, or identified in the preceding applicability assembly to detect damage, failure, or provision, regardless of whether it has been Restatement of AFM Revision Required by irregularity. Available lighting is normally modified, altered, or repaired in the area AD 98–04–45 supplemented with a direct source of good subject to the requirements of this AD. For lighting at intensity deemed appropriate by airplanes that have been modified, altered, or (b) Within 7 days after December 14, 1994 (the effective date of AD 94–24–02, the inspector. Inspection aids such as mirror, repaired so that the performance of the magnifying lenses, etc., may be used. Surface requirements of this AD is affected, the amendment 39–9075), accomplish the requirements of paragraph (b)(1) and (b)(2) of cleaning and elaborate access procedures owner/operator must request approval for an may be required.’’ alternative method of compliance in this AD. (d) For airplanes having serial numbers accordance with paragraph (i) of this AD. The (1) Remove the elevator dampers in 7003 through 7054: Within 12 months after request should include an assessment of the accordance with Canadair Regional Jet Alert April 3, 1998 (the effective date of AD 98– effect of the modification, alteration, or repair Service Bulletin S.B. A601R–27–041, dated 04–45, amendment 39–10356), install new on the unsafe condition addressed by this October 28, 1994. elevator flutter dampers (P/N 601R75142–7) AD; and, if the unsafe condition has not been (2) Revise the Limitations Section of the in accordance with Section 2.B., Part B, of eliminated, the request should include FAA-approved AFM to include the Canadair Regional Jet Service Bulletin S.B. specific proposed actions to address it. following, which advises the flight crew of daily checks to verify proper operation of the 601R–27–040, Revision ‘B,’ dated September Compliance: Required as indicated, unless elevator control system. Revision of the AFM 11, 1995. accomplished previously. may be accomplished by inserting a copy of To prevent premature failure of the shear this AD or AFM Revision 32, dated March 30, New Requirements of This AD: Installation pins of the elevator damper, which may 1995, in the AFM. of Shear Pins increase the likelihood of jamming or Note 3: The daily check described in the (e) For airplanes having serial numbers restricting movement of the elevator and the AFM TR RJ/40, dated October 28, 1994, 7003 through 7142 inclusive, and 7144: resultant adverse effect on controllability of meets the requirements of this paragraph. Within 12 months after the effective date the airplane; accomplish the following: Therefore, inserting a copy of TR RJ/40 into of this AD, install new shear pins [part Restatement of AFM Required by AD the AFM in lieu of this AD is considered an number (P/N) 601R24063–31/S] in 98–04–45 acceptable means of compliance with this accordance with Part A of the paragraph. Accomplishment Instructions of Canadair (a) For airplanes having serial numbers Regional Jet Service Bulletin S.B. 601R–27– 7003 through 7054 inclusive: Within 30 days ‘‘Elevator, Before Engine Start (First Flight of Day) 100, Revision ‘A,’ dated March 10, 2000.
VerDate 112000 15:43 Oct 30, 2000 Jkt 194001 PO 00000 Frm 00003 Fmt 4702 Sfmt 4702 E:\FR\FM\31OCP1.SGM pfrm11 PsN: 31OCP1 Federal Register / Vol. 65, No. 211 / Tuesday, October 31, 2000 / Proposed Rules 64901
After accomplishment of the installation of Operators shall submit their requests through Comments may be inspected at this new shear pins, Canadair Regional Jet TR RJ/ an appropriate FAA Principal Maintenance location between 9:00 a.m. and 3:00 68–1, dated February 15, 2000, may be Inspector, who may add comments and then p.m., Monday through Friday, except removed from the AFM. send it to the Manager, New York ACO. Federal holidays. Comments may be Inspection of Maintenance Records Required Note 5: Information concerning the submitted via fax to (425) 227–1232. by This AD existence of approved alternative methods of Comments may also be sent via the compliance with this AD, if any, may be (f) For airplanes having serial numbers obtained from the New York ACO. Internet using the following address: 9– 7143, and 7145 through 7357 inclusive: anm–[email protected]. Within 14 days after the effective date of this Special Flight Permits Comments sent via fax or the Internet AD, perform a one-time inspection of the (j) Special flight permits may be issued in must contain ‘‘Docket No. 2000–NM– maintenance records to determine the accordance with sections 21.197 and 21.199 72–AD’’ in the subject line and need not replacement status of the shear pins of the elevator flutter dampers, in accordance with of the Federal Aviation Regulations (14 CFR be submitted in triplicate. Comments Part B of the Accomplishment Instructions of 21.197 and 21.199) to operate the airplane to sent via the Internet as attached Canadair Regional Jet Service Bulletin S.B. a location where the requirements of this AD electronic files must be formatted in 601R–27–100, Revision ‘A,’ dated March 10, can be accomplished. Microsoft Word 97 for Windows or 2000. Note 6: The subject of this AD is addressed ASCII text. (1) If the maintenance records indicate that in Canadian airworthiness directive CF– The service information referenced in all shear pins were NOT replaced after 2000–10, dated March 23, 2000. the proposed rule may be obtained from delivery of the airplane, or if all shear pins Issued in Renton, Washington, on October Airbus Industrie, 1 Rond Point Maurice were replaced with shear pins having P/N 25, 2000. 601R24063–31/S: No further action is Bellonte, 31707 Blagnac Cedex, France. required by this AD. Donald L. Riggin, This information may be examined at (2) If the maintenance records indicate that Acting Manager, Transport Airplane the FAA, Transport Airplane any shear pin was replaced after delivery of Directorate, Aircraft Certification Service. Directorate, 1601 Lind Avenue, SW., the airplane with a shear pin having P/N [FR Doc. 00–27947 Filed 10–30–00; 8:45 am] Renton, Washington. 601R24063–31 or 601R24063–953, or if the BILLING CODE 4910±13±P FOR FURTHER INFORMATION CONTACT: maintenance records do not verify that all Norman B. Martenson, Manager, shear pins having P/N 601R24063–31/S are installed: Accomplish the requirements of International Branch, ANM–116, FAA, paragraph (g) of this AD at the times DEPARTMENT OF TRANSPORTATION 1601 Lind Avenue, SW., Renton, specified in that paragraph. Washington 98055–4056; telephone Federal Aviation Administration (425) 227–2110; fax (425) 227–1149. AFM Revision and Replacement Required by SUPPLEMENTARY INFORMATION: This AD 14 CFR Part 39 (g) For airplanes on which any shear pin Comments Invited of the elevator flutter dampers of the [Docket No. 2000±NM±72±AD] Interested persons are invited to elevators was replaced after delivery of the RIN 2120±AA64 airplane with a shear pin having P/N participate in the making of the 601R24063–31 or 601R24063–953, or for Airworthiness Directives; Airbus Model proposed rule by submitting such airplanes on which verification of shear pins A300 B2, A300 B4, A300 B4±600, A300 written data, views, or arguments as having P/N 601R24063–31/S is not possible: B4±600R, A300 F4±600R, and A310 they may desire. Communications shall Accomplish the requirements of paragraphs Series Airplanes identify the Rules Docket number and (g)(1) and (g)(2) of this AD at the times be submitted in triplicate to the address specified in those paragraphs. AGENCY: Federal Aviation specified above. All communications (1) Within 30 days after the effective date Administration, DOT. of this AD, revise the Normal Procedures received on or before the closing date Section of the AFM by inserting Canadair ACTION: Notice of proposed rulemaking for comments, specified above, will be Regional Jet TR RJ/68–1, dated February 15, (NPRM). considered before taking action on the 2000 in the AFM, which advises the flight proposed rule. The proposals contained crew of an additional first-flight-of-the-day SUMMARY: This document proposes the in this notice may be changed in light check of the elevator control system. adoption of a new airworthiness of the comments received. (2) Within 12 months after the effective directive (AD) that is applicable to Submit comments using the following date of this AD, replace the shear pins with certain Airbus Model A300 B2, A300 format: new, improved shear pins having P/N B4, A300 B4–600, A300 B4–600R, A300 • 601R24063–31/S, in accordance with Part C Organize comments by issue. For F4–600R, and A310 series airplanes. example, discuss a request to change the of the Accomplishment Instructions of This proposal would require Canadair Regional Jet Service Bulletin S.B. compliance time and a request to 601R–27–100, Revision ‘A,’ dated March 10, modification of the escape slides. This change a service bulletin reference as 2000. After accomplishment of the action is necessary to prevent deflation two separate issues. installation of new shear pins, the temporary of the escape slide after deployment, • For each issue, state the specific revision required by paragraph (g)(1) of this which could result in a delay during an change to the proposed AD being AD may be removed from the AFM. emergency evacuation. This action is requested. Spares intended to address the identified • Include justification (e.g., reasons or unsafe condition. (h) As of the effective date of this AD, no data) for each request. person shall install a shear pin of the elevator DATES: Comments must be received by Comments are specifically invited on flutter dampers having P/N 601R24063–31 or November 30, 2000. the overall regulatory, economic, 601R24063–953 on any airplane. ADDRESSES: Submit comments in environmental, and energy aspects of Alternative Methods of Compliance triplicate to the Federal Aviation the proposed rule. All comments Administration (FAA), Transport submitted will be available, both before (i) An alternative method of compliance or adjustment of the compliance time that Airplane Directorate, ANM–114, and after the closing date for comments, provides an acceptable level of safety may be Attention: Rules Docket No. 2000–NM– in the Rules Docket for examination by used if approved by the Manager, New York 72–AD, 1601 Lind Avenue, SW., interested persons. A report Aircraft Certification Office (ACO), FAA. Renton, Washington 98055–4056. summarizing each FAA-public contact
VerDate 112000 15:43 Oct 30, 2000 Jkt 194001 PO 00000 Frm 00004 Fmt 4702 Sfmt 4702 E:\FR\FM\31OCP1.SGM pfrm11 PsN: 31OCP1 64902 Federal Register / Vol. 65, No. 211 / Tuesday, October 31, 2000 / Proposed Rules concerned with the substance of this ANM–114, Attention: Rules Docket No. operational tests. The slides deflated proposal will be filed in the Rules 2000–NM–72–AD, 1601 Lind Avenue, because the inflation bottle actuator Docket. SW., Renton, Washington 98055–4056. punctured the lower part of the slide Commenters wishing the FAA to during deployment. The DGAC advises Discussion acknowledge receipt of their comments that a slide could be punctured if the submitted in response to this notice ´ ´ The Direction Generale de l’Aviation inflation bottle was improperly installed must submit a self-addressed, stamped Civile (DGAC), which is the (upside-down in its fabric-type bag) postcard on which the following airworthiness authority for France, when the slide was packed. Such a slide statement is made: ‘‘Comments to puncture and consequent deflation, if Docket No. 2000–NM–72–AD.’’ The notified the FAA that an unsafe condition may exist on certain Airbus not corrected, could result in a delay postcard will be date stamped and during an emergency evacuation. returned to the commenter. Model A300 B2, A300 B4, A300 B4–600, A300 B4–600R, A300 F4–600R, and Explanation of Relevant Service Availability of NPRMs A310 series airplanes. The DGAC Information Any person may obtain a copy of this advises that it has received several NPRM by submitting a request to the reports that escape slides deflated Airbus has issued the following FAA, Transport Airplane Directorate, immediately after deployment during service bulletins:
Revision Service bulletin level Date Model
A300±25±0466 ...... 01 ...... December 1, 1999 ...... A300 B2 A300 B4 A300±25±6146 ...... 01 ...... December 1, 1999 ...... A300 B4±600 A300 B4±600R A300 F4±600R A310±25±2133 ...... Original ...... June 21, 1999 ...... A310
These service bulletins describe agreement. Pursuant to this bilateral the proposed requirements of this AD procedures for modification of certain airworthiness agreement, the DGAC has action, and that no operator would BFGoodrich escape slides. The kept the FAA informed of the situation accomplish those actions in the future if modification involves: described above. The FAA has this proposed AD were not adopted. The • Installing a pad on the actuator of examined the findings of the DGAC, cost impact figures discussed in AD the inflation bottle to protect the slide reviewed all available information, and rulemaking actions represent only the in case of contact between the bottle and determined that AD action is necessary time necessary to perform the specific the slide; and for products of this type design that are actions actually required by the AD. • Replacing the fabric-type bottle bag certificated for operation in the United These figures typically do not include (used on earlier slides) with a strap-type States. incidental costs, such as the time bottle bag to ensure the correct required to gain access and close up, Explanation of Requirements of orientation of the bottle. planning time, or time necessitated by Proposed Rule This modification will reduce the other administrative actions. possibility of the slide being punctured Since an unsafe condition has been by contact with the regulator valve identified that is likely to exist or Regulatory Impact during inflation. Accomplishment of the develop on other airplanes of the same The regulations proposed herein actions specified in these service type design registered in the United would not have a substantial direct bulletins is intended to adequately States, the proposed AD would require effect on the States, on the relationship address the identified unsafe condition. modification of the escape slides, as between the national Government and The DGAC classified these service specified in the Airbus service bulletins the States, or on the distribution of bulletins as mandatory and issued described previously. power and responsibilities among the French airworthiness directive 2000– various levels of government. Therefore, Cost Impact 059–302(B), dated February 9, 2000, in it is determined that this proposal order to ensure the continued The FAA estimates that 126 airplanes would not have federalism implications airworthiness of these airplanes in of U.S. registry would be affected by this under Executive Order 13132. France. proposed AD, that it would take For the reasons discussed above, I The Airbus service bulletins refer to approximately 1 work hour per slide to certify that this proposed regulation (1) BFGoodrich Service Bulletin 7A1296/ accomplish the proposed actions, and is not a ‘‘significant regulatory action’’ 7A1298–25–298, dated January 15, that the average labor rate is $60 per under Executive Order 12866; (2) is not 1999, as an additional source of service work hour. Required parts would cost a ‘‘significant rule’’ under the DOT information for modifying the escape approximately $124 to $185 per slide. Regulatory Policies and Procedures (44 slides. Each Model A300 and A300–600 series FR 11034, February 26, 1979); and (3) if airplane has 6 escape doors, and each promulgated, will not have a significant FAA’s Conclusions Model A310 series airplane has 4 escape economic impact, positive or negative, These airplane models are doors. Based on these figures, the cost on a substantial number of small entities manufactured in France and are type impact of the proposed AD on U.S. under the criteria of the Regulatory certificated for operation in the United operators is estimated to be between Flexibility Act. A copy of the draft States under the provisions of section $736 and $1,470 per airplane. regulatory evaluation prepared for this 21.29 of the Federal Aviation The cost impact figure discussed action is contained in the Rules Docket. Regulations (14 CFR 21.29) and the above is based on assumptions that no A copy of it may be obtained by applicable bilateral airworthiness operator has yet accomplished any of contacting the Rules Docket at the
VerDate 112000 15:43 Oct 30, 2000 Jkt 194001 PO 00000 Frm 00005 Fmt 4702 Sfmt 4702 E:\FR\FM\31OCP1.SGM pfrm11 PsN: 31OCP1 Federal Register / Vol. 65, No. 211 / Tuesday, October 31, 2000 / Proposed Rules 64903 location provided under the caption Administrator, the Federal Aviation Authority: 49 U.S.C. 106(g), 40113, 44701. ADDRESSES. Administration proposes to amend part 39 of the Federal Aviation Regulations § 39.13 [Amended] List of Subjects in 14 CFR Part 39 (14 CFR part 39) as follows: 2. Section 39.13 is amended by Air transportation, Aircraft, Aviation adding the following new airworthiness safety, Safety. PART 39ÐAIRWORTHINESS directive: DIRECTIVES The Proposed Amendment Airbus Industrie: Docket 2000–NM–72–AD. Accordingly, pursuant to the 1. The authority citation for part 39 Applicability: The following airplanes, authority delegated to me by the continues to read as follows: certificated in any category:
Equipped with any BFGoodrich Model slide having part Excluding airplanes modified in accordance withÐ numberÐ
A300 B2, A300 B4 ...... 7A1296±001 Airbus Service Bulletin A300±25±0466, Revision 01, 7A1296±002 dated December 1, 1999; or 7A1296±003 BFGoodrich Service Bulletin 7A1296/7A1298±25± 7A1296±004 298, dated January 15, 1999. 7A1298±001 7A1298±002 7A1298±003 7A1298±004 A300 B4±600, A300 B4±600R, A300 F4±600R ...... 7A1296±001 Airbus Service Bulletin A300±25±6146, Revision 01, 7A1296±002 dated December 1, 1999; or 7A1296±003 BFGoodrich Service Bulletin 7A1296/7A1298±25± 7A1296±004 298, dated January 15, 1999. 7A1298±001 7A1298±002 7A1298±003 7A1298±004 A310 ...... 7A1298±001 Airbus Service Bulletin A310±25±2133, dated Janu- 7A1298±002 ary 21, 1999; or 7A1298±003 BFGoodrich Service Bulletin 7A1296/7A1298±25± 7A1298±004 298, dated January 15, 1999.
Note 1: This AD applies to each airplane accordance with paragraph (c) of this AD. To prevent deflation of the escape slide identified in the preceding applicability The request should include an assessment of after deployment, which could result in a provision, regardless of whether it has been the effect of the modification, alteration, or delay during an emergency evacuation, otherwise modified, altered, or repaired in repair on the unsafe condition addressed by accomplish the following: the area subject to the requirements of this this AD; and, if the unsafe condition has not AD. For airplanes that have been modified, Modification been eliminated, the request should include altered, or repaired so that the performance (a) Within 34 months after the effective specific proposed actions to address it. of the requirements of this AD is affected, the date of this AD, modify the escape slides in owner/operator must request approval for an Compliance: Required as indicated, unless accordance with the applicable Airbus alternative method of compliance in accomplished previously. service bulletin listed in Table 1 of this AD.
TABLE 1.ÐSERVICE BULLETINS
Service Model bulletin Revision level Date
A300 ...... A300±25±0466 01 ...... December 1, 1999. A300±600 ...... A300±25±6146 01 ...... December 1, 1999. A310 ...... A310±25±2133 Original ...... January 21, 1999.
Note 2: The Airbus service bulletins refer TABLE 2.ÐSLIDE PART NUMBERSÐ FAA Principal Maintenance Inspector, who to BFGoodrich Service Bulletin 7A1296/ Continued may add comments and then send it to the 7A1298–25–298, dated January 15, 1999, as Manager, International Branch, ANM–116. an additional source of service information 7A1296±003 ...... 7A1296±004 Note 3: Information concerning the for modifying the escape slides. 7A1298±001 ...... 7A1298±002 existence of approved alternative methods of (b) As of the effective date of this AD, no 7A1298±003 ...... 7A1298±004 compliance with this AD, if any, may be person shall install, on any airplane, a BFGoodrich escape slide having a part Alternative Methods of Compliance obtained from the International Branch, number listed in Table 2 of this AD, unless (c) An alternative method of compliance or ANM–116. that slide has been modified in accordance adjustment of the compliance time that Special Flight Permits with this AD: provides an acceptable level of safety may be used if approved by the Manager, (d) Special flight permits may be issued in TABLE 2.ÐSLIDE PART NUMBERS International Branch, ANM–116, Transport accordance with sections 21.197 and 21.199 Airplane Directorate, FAA. Operators shall of the Federal Aviation Regulations (14 CFR 7A1296±001 ...... 7A1296±002 submit their requests through an appropriate 21.197 and 21.199) to operate the airplane to
VerDate 112000 15:43 Oct 30, 2000 Jkt 194001 PO 00000 Frm 00006 Fmt 4702 Sfmt 4702 E:\FR\FM\31OCP1.SGM pfrm11 PsN: 31OCP1 64904 Federal Register / Vol. 65, No. 211 / Tuesday, October 31, 2000 / Proposed Rules a location where the requirements of this AD 1155 21st Street, NW., Washington, DC by Rule 1.32 are hereinafter collectively can be accomplished. 20581. In addition, comments may be referred to as the ‘‘segregation Note 4: The subject of this AD is addressed sent by facsimile to (202) 418–5521, or computation’’. 2 in French airworthiness directive 2000–059– by electronic mail to [email protected]. In 1959, the Commodity Exchange 302(B), dated February 9, 2000. Reference should be made to Authority (‘‘CEA’’), the predecessor Issued in Renton, Washington, on October ‘‘Recordkeeping—Futures Commission agency of the Commission, issued 25, 2000. Merchants’ Daily Computation of the Administrative Determination No. 171 Donald L. Riggin, Customer Segregated Amounts.’’ (‘‘AD No. 171’’) in which it expressed the opinion that if an FCM elects to Acting Manager, Transport Airplane FOR FURTHER INFORMATION CONTACT: Directorate, Aircraft Certification Service. Thomas J. Smith, Special Counsel, accept securities from a customer as margin, the securities, for purposes of [FR Doc. 00–27948 Filed 10–30–00; 8:45 am] Division of Trading and Markets, computing the segregation computation, BILLING CODE 4910±13±P Commodity Futures Trading Commission, Three Lafayette Centre, must be handled separately from the 1155 21st Street, NW., Washington, DC money deposited by, or due to, other customers.3 The AD further provided COMMODITY FUTURES TRADING 20581; telephone (202) 418–5495; electronic mail [email protected]; or that any net liquidating deficit in the COMMISSION Henry J. Matecki, Financial Audit and account of a customer who deposited securities as margin was required to be 17 CFR Part 1 Review Branch, Commodity Futures Trading Commission, 300 S. Riverside covered by a deposit in segregation of an RIN 3038±AB52 Plaza, Room 1600–N, Chicago, IL 60606; equivalent amount of the FCM’s own telephone (312) 886–3217; electronic money. This effectively required an Recordkeeping; Amendments to the mail [email protected]. FCM who held securities for a particular Daily Computation of the Amount of customer to segregate for the full value SUPPLEMENTARY INFORMATION: Customer Funds Required To Be of those securities even though the Segregated I. Offsetting Customer Net Liquidating customer’s account liquidated to a AGENCY: Commodity Futures Trading Deficits or Debit Ledger Balances With deficit. For example, if a customer had Commission. Securities That Have a ‘‘Ready Market’’ a credit ledger balance of $3,000 and a mark-to-market loss on open positions ACTION: Proposed rules. A. Background of $4,200, that customer’s account SUMMARY: The Commodity Futures Section 4d(2) of the Act requires, would liquidate to a deficit of $1,200.4 Trading Commission (‘‘Commission’’) is among other things, that an FCM If that customer also had securities with proposing to amend Commission Rule segregate from its own assets all money, a market value of $50,000 on deposit 1.32 to permit a futures commission securities, and other property held for with the FCM as margin for his merchant (‘‘FCM’’), in computing the customers as margin for their commodity account, the FCM would be amount of customer funds required to commodity futures and option required to include in its daily be held in segregated accounts pursuant contracts, as well as any gains accruing segregation computation, a $50,000 to section 4d(2) of the Commodity to such customers from open futures segregation requirement for that Exchange Act (‘‘Act’’), to offset a net and option positions. The statute also customer. The FCM would not have liquidating deficit or debit ledger prohibits an FCM from using the money, been able to reduce the value of the balance in a customer’s account with securities, or property of one customer security by the $1,200 net liquidating securities that have a ‘‘ready market’’ as to margin or secure futures or option deficit. defined by Rule 15c3–1(c)(11) of the positions of another customer. The The rationale for this treatment was Securities and Exchange Commission segregation requirement is intended to: that securities, unlike cash, are not (‘‘SEC’’) and that are deposited as Protect customers who are dealing with fungible. Therefore, if an FCM became an FCM by assuring the FCM has funds margin by such customer.1 The proposal insolvent, a customer whose securities available to readily liquidate its would limit the amount of the offset to could be identified to that customer obligations to its customers; assure an the market value of the securities, less might be in a position to reclaim those FCM has funds available to meet its the applicable haircuts set forth in SEC securities free of any pro rata daily variation margin obligations to the Rule 15c3–1(c)(2)(vi). The FCM would distribution. If the customer who clearing organizations of contract also be required to maintain a security deposited these ‘‘specifically markets; and prohibit an FCM from interest in the securities, including a identifiable’’ securities had been misappropriating customer funds for its written authorization to liquidate the own purposes. 2 Regulation 1.32 further requires that the FCM securities at the FCM’s discretion, and Commission Regulations 1.20 through complete the segregation computation for each to segregate the securities in a 1.30 implement the segregation of funds trading day prior to 12:00 noon on the next business day and that the computation, and all supporting safekeeping account with a bank, trust provisions of Section 4d(2) of the Act. company, clearing organization of a data, be maintained for a five-year period in Rule 1.32, a related recordkeeping accordance with Commission Rule 1.31. contract market, or another FCM. regulation, requires each FCM to 3 Commodity Exchange Authority Administrative DATES: Comments must be received on prepare a daily computation which Determination No. 171 (Aug. 13, 1959). or before November 30, 2000. 4 A distinction is sometimes drawn between a net shows: (1) The amount of funds that an liquidating deficit and a debit balance. A net ADDRESSES: Comments should be FCM is required to segregate for liquidating deficit is an amount owed to the FCM mailed to Jean A. Webb, Secretary, customers who are trading on U.S. resulting from the combination of the customer’s Commodity Futures Trading commodity exchanges pursuant to the debit or credit ledger balance and the mark-to- market gain or loss on any open positions in the Commission, Three Lafayette Centre, Act and the Commission’s regulations; customer’s account. A debit balance is the amount (2) the amount of funds the FCM owed to the FCM by the customer represented by 1 Commission regulations cited herein may be actually has in segregated accounts; and the debit ledger balance, and implies that there are found at 17 CFR Ch. I (2000). SEC regulations cited (3) the amount, if any, of the FCM’s no open positions in the account. For purposes of herein may be found at 17 CFR Ch. II (2000). this proposal, a net liquidating deficit also includes Section 4d(2) of the Act may be found at 7 U.S.C. residual interest in the customer funds customers’ accounts with debit ledger balances and § 6d(2) (1994). segregated. The computations required no open positions.
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In particular, the segregated accounts to pay other security interest in the securities, Commission is interested in obtaining customers would be insufficient. including the written authorization to views regarding whether the types of The concerns raised by the CEA were liquidate the securities at the FCM’s securities that would be permitted to subsequently addressed by the passage discretion, and to segregate the offset customer net liquidating deficits of the Bankruptcy Reform Act of 1978 securities in a safekeeping account with should be further restricted in any way, which provided that a commodity a bank, trust company, clearing for example, to securities which are futures customer could not reclaim organization of a contract market, or deemed acceptable for margin, or specifically identifiable property that another FCM. performance bond, under exchange would exceed such customer’s pro rata SEC Rule 15c3–1(c)(11) defines rules.11 share of the FCM’s bankruptcy estate.5 ‘‘ready market’’ to include a recognized II. Related Matters In recognition of this change, the established securities market in which Commission’s Division of Trading and there exists independent bona fide A. Regulatory Flexibility Act Markets (‘‘Division of T&M’’) issued an offers to buy and sell so that a price The Regulatory Flexibility Act advisory wherein it set forth a no-action reasonably related to the last sales price (‘‘RFA’’), 5 U.S.C. 601–611, requires that position applicable to FCMs with or current bona fide competitive bid and agencies, in proposing rules, consider respect to the segregation computation offer quotations can be determined for a the impact of those rules on small when customers’ accounts incur net particular security almost 6 businesses. The proposed rule liquidating deficits. In the advisory, the instantaneously and where payment amendments discussed herein would Division of T&M stated that it would not will be received in settlement of a sale affect FCMs. The Commission has recommend that the Commission at such price within a relatively short previously determined that, based upon commence an enforcement action time conforming to trade custom.9 the fiduciary nature of FCM/customer against an FCM based solely upon the Therefore, if adopted, the proposal relationships, as well as the requirement FCM’s use of customer-owned U.S. would expand the securities against that FCMs meet minimum financial Treasury Bills, U.S. Treasury Notes, or which an FCM could offset a customer’s requirements, FCMs should be excluded U.S. Treasury Bonds (collectively liquidating deficit from just Treasuries from the definition of small entity.12 ‘‘Treasuries’’) in connection with the to any security which has a ready segregation computation provided that market as defined in the SEC’s rule. In B. Paperwork Reduction Act certain conditions were met, including the example set forth above, the FCM The Paperwork Reduction Act of that: (1) The FCM maintained a security would be required to segregate $48,800 1995, 44 U.S.C. 3501 et seq. (Supp. I interest in the Treasuries, which for the customer ($50,000 in securities 1995), imposes certain requirements on included written authorization to less the $1,200 liquidating deficit), federal agencies (including the liquidate the Treasuries at the FCM’s rather than $50,000 as is currently Commission) to review rules and rule discretion in order to protect the FCM required. amendments to evaluate the information and to cover any deficit in the The Commission believes that the collection burden that they impose on customer’s account; and (2) the proposal recognizes both the economic the public. The Commission believes Treasuries were segregated in and legal realities that exist in such a that the proposed amendments to Rule safekeeping accounts with a bank, trust situation. Economically, the FCM is company, clearing organization of a liable to its customer for only $48,800, 10 Of course should there be a shortfall in the contract market, or another FCM as not the amount represented by the funds available to pay all customers, the net amount provided by the Act and Commission owed would be included among the claims of all current value of the securities it is customers and be subject to pro rata distribution of regulations. holding for the customer, and should be available assets. B. Proposed Rule Amendments required to segregate only the amount it 11 It should also be noted that the Commission owes its customer. Likewise, current requires an FCM to set aside in special accounts a The Joint Audit Committee (‘‘JAC’’) certain amount of funds for those of its U.S.- bankruptcy rules recognize this domiciled customers who trade on non-U.S. has asked the Commission to amend economic reality by permitting the FCM Rule 1.32 to permit an FCM to offset a commodity markets. (See Commission Regulation to liquidate the securities, apply the 30.7, which identifies this as the ‘‘secured customer’s net liquidating deficit with proceeds against the liquidating deficit, amount.’’) Unlike section 4d(2) of the Act and securities deposited by such customer Commission Regulation 1.20, which require an that have a ‘‘ready market’’ as defined FCM to segregate for the total net liquidating 7 surveillance activities to promote a uniform equities in accounts of customers who are trading in SEC Rule 15c3–1(c)(11). The amount framework of self-regulation. on U.S. markets, Regulation 30.7 requires the FCM 8 SEC Rule 15c3–1(c)(2)(vi) sets forth haircuts that to set-aside only an amount that equals the margin 5 The provisions of that statute relevant to the a broker or dealer is required to apply to investment required on foreign market open positions, plus or futures industry have been amended since that time securities in computing its adjusted net capital. minus the mark-to-market gain or loss on such and current law is codified in 11 U.S.C. 362, 546, This Rule and the haircuts are incorporated by positions. This is normally less than the net 548, 556 and 761–766 (1994). The Commission’s reference in the Commission’s net capital rule. See liquidating equity in such accounts. However, an bankruptcy Rules are contained in 17 CFR part 190 Commission Rule 1.17(c)(2)(vi)(B). FCM is permitted to set-aside funds for customers (1999). 9 The definition goes on to say that a ‘‘ready trading on foreign markets in an amount which is 6 Division of Trading and Markets Advisory on market’’ will also be deemed to exist where calculated in the same manner as that done in Treatment of Government Securities Deposited as securities have been accepted as collateral for a loan determining section 4d(2) segregation requirements. Customer Funds, reprinted in [1980–1982 Transfer by a bank as defined in section 3(a)(6) of the If the FCM chooses to calculate its foreign secured Binder] Comm. Fut. L. Rep. (CCH) ¶ 21,101 (Nov. Securities and Exchange Act of 1934 and where the amount requirement using the same method as it 3, 1980) (the ‘‘November 1980 Advisory’’). broker or dealer demonstrates to its Examining uses to calculate the segregation requirements 7 The JAC is comprised of representatives of the Authority that such securities adequately secure under section 4d(2) of the Act, then the FCM would audit and compliance departments of the domestic such loans as that term is defined in Rule 15c3– be able to use the same type of offset as permitted SROs and the National Futures Association. The 1(c)(5). This portion of the definition of a ‘‘ready under the proposed change to Rule 1.32. JAC coordinates the industry’s audit and ongoing market’’ is not applicable to this proposal. 12 47 FR 18618, 18619–18620 (April 30, 1982).
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1.32 do not impose an information in Rule 15c3–1(c)(11)(i) of the Securities procedures that we will follow for the collection burden on the public. and Exchange Commission (17 CFR public hearing, if one is requested. 240.15c3–1(c)(11)(i)). List of Subjects in 17 CFR Part 1 DATES: We will accept written (c) The daily computations required comments until 4:00 p.m., c.s.t., Brokers, Commodity Futures. by this section must be completed by November 30, 2000. If requested, we In consideration of the foregoing and the futures commission merchant prior will hold a public hearing on the pursuant to the authority contained in to noon on the next business day and amendment on November 27, 2000. We the Commodity Exchange Act and, in must be kept, together with all will accept requests to speak at the particular, sections 4d, 4f, 4g and 8a(5) supporting data, in accordance with the hearing until 4:00 p.m., c.s.t. on thereof, 7 U.S.C. 6d, 6f, 6g and 12a(5), requirements of § 1.31. November 15, 2000. the Commission hereby proposes to Issued in Washington D.C. on October 25, ADDRESSES: You should mail or hand amend Chapter I of Title 17 of the Code 2000 by the Commission. deliver written comments and requests of Federal Regulations as follows: Jean A. Webb, to speak at the hearing to John W. Coleman, Mid-Continent Regional PART 1ÐGENERAL REGULATIONS Secretary of the Commission. Coordinating Center, at the address UNDER THE COMMODITY EXCHANGE [FR Doc. 00–27914 Filed 10–30–00; 8:45 am] BILLING CODE 6351±01±P listed below. ACT You may review copies of the 1. The authority citation for Part 1 Missouri program, the amendment, a listing of any scheduled public hearings, continues to read as follows: DEPARTMENT OF THE INTERIOR and all written comments received in Authority: 7 U.S.C. 1a, 2, 2a, 4, 4a, 6, 6a, 6b, 6c, 6d, 6e, 6f, 6g, 6h, 6i, 6j, 6k, 6l, 6m, Office of Surface Mining Reclamation response to this document at the 6n, 6o, 6p, 7, 7a, 7b, 8, 9, 12, 12a, 12c, 13a, and Enforcement addresses listed below during normal 13a–1, 16, 16a, 19, 21, 23, and 24. business hours, Monday through Friday, excluding holidays. You may receive 2. Section 1.32 is proposed to be 30 CFR Part 925 one free copy of the amendment by revised to read as follows: [SPATS No. MO±033±FOR] contacting OSM’s Mid-Continent Regional Coordinating Center. § 1.32 Segregated account; daily Missouri Regulatory Program and computation and record. John W. Coleman, Mid-Continent Abandoned Mine Land Reclamation Regional Coordinating Center, Office of (a) Each futures commission merchant Plan must compute as of the close of each Surface Mining, Alton Federal Building, business day: AGENCY: Office of Surface Mining 501 Belle Street, Alton, Illinois 62002, (1) The total amount of customer Reclamation and Enforcement, Interior. Telephone: (618) 463–6460. Missouri Department of Natural funds on deposit in segregated accounts ACTION: Proposed rule; public comment Resources, Land Reclamation Program, on behalf of commodity and option period and opportunity for public 205 Jefferson Street, P.O. Box 176, customers; hearing. (2) The amount of such customer Jefferson City, Missouri 65102, funds required by the Act and these SUMMARY: The Office of Surface Mining Telephone: (573) 751–4041. regulations to be on deposit in Reclamation and Enforcement (OSM) is FOR FURTHER INFORMATION CONTACT: John segregated accounts on behalf of such announcing receipt of a proposed W. Coleman, Mid-Continent Regional commodity and option customers; and amendment to the Missouri regulatory Coordinating Center. Telephone: (618) (3) The amount of the futures program (Missouri program) and the 463–6460. Internet: commission merchant’s residual interest Missouri Abandoned Mine Land [email protected]. in such customer funds. Reclamation Plan (Missouri plan) under SUPPLEMENTARY INFORMATION: (b) In computing the amount of funds the Surface Mining Control and required to be in segregated accounts, a Reclamation Act of 1977 (SMCRA). I. Background on the Missouri Program futures commission merchant may offset Missouri proposes revisions to its rules and the Missouri Plan any net deficit in a particular customer’s pertaining to surface mining On November 21, 1980, the Secretary account against the current market value performance requirements, special of Interior conditionally approved the of readily marketable securities, less mining activities, prohibitions and Missouri program. You can find general applicable percentage deductions (i.e., limitations on mining in certain areas background information on the Missouri ‘‘securities haircuts’’) as set forth in and areas unsuitable for mining, program, including the Secretary’s Rule 15c3–1(c)(2)(vi) of the Securities permitting requirements, bond and findings, the disposition of comments, and Exchange Commission (17 CFR insurance requirements, definitions and and the conditions of approval in the 241.15c3–1(c)(2)(vi)), held for the same general requirements, and abandoned November 21, 1980, Federal Register customer’s account. The futures mine land reclamation requirements. (45 FR 77017). You can find later commission merchant must maintain a Missouri intends to revise its program to actions on the Missouri program at 30 security interest in the securities, be consistent with the corresponding CFR 925.12, 925.15, and 925.16. including the written authorization to Federal regulations, to provide On January 29, 1982, the Secretary of liquidate the securities at the futures additional safeguards, to clarify the Interior approved the Missouri plan. commission merchant’s discretion, and ambiguities, and to improve operational Background information on the must segregate the securities in a efficiency. Missouri plan, including the Secretary’s safekeeping account with a bank, trust This document gives the times and findings, the disposition of comments, company, clearing organization of a locations that the Missouri program and and the approval of the plan can be contract market, or another futures the proposed amendment to that found in the January 29, 1982, Federal commission merchant. For purposes of program are available for your Register (47 FR 4253). Subsequent this section, a security will be inspection, the comment period during actions concerning the Missouri plan considered readily marketable if it is which your may submit written and amendments to the plan can be traded on a ‘‘ready market’’ as defined comments on the amendment, and the found at 30 CFR 925.25.
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II. Description of the Proposed the language ‘‘and any design criteria set storage volume. They also require an Amendment by the director’’ at the end of the impoundment that meets the Class B or By letter dated October 5, 2000 paragraph. C criteria for dams in TR–60 to comply (Administrative Record No. MO–662.1), d. At 10 CSR 40–3.040(6)(T) and 10 with the freeboard hydrograph criteria Missouri sent us an amendment to its CSR 40–3.200(6)(T), Missouri is adding in the ‘‘Minimum Emergency Spillway program and plan under SMCRA and the following new provision: Hydrologic Criteria’’ table in TR–60. the Federal regulations at 30 CFR Impoundments meeting the Class B or C i. Missouri is adding a new subsection 732.17(b) and 884.15, respectively. criteria for dams in the U.S. Department of at 10 CSR 40–3.040(10)(N) and 10 CSR Missouri sent the amendment in Agriculture, Soil Conservation Service (now 40–3.200(10)(N) entitled ‘‘Foundation.’’ response to our letter dated June 17, renamed as the Natural Resources Paragraphs (10)(N)1 require foundations Conservation Service) Technical Release No. 1997 (Administrative Record No. MO– and abutments for an impounding 60 (210–VI, TR–60, Revised Oct. 1985), structure to be stable during all phases 651), that we sent to Missouri under 30 entitled ‘‘Earth Dams and Reservoirs,’’ CFR 732.17(c), and in response to of construction and operation and the hereafter in these rules referred to as TR–60, design must be based on adequate and required program amendments at 30 or the size or criteria of 30 CFR 77.216 must CFR 925.16. The amendment also be examined in accordance with 30 CFR accurate information on the foundation includes changes made at Missouri’s 77.216–3. conditions. For impoundments meeting own initiative. Missouri proposes to the Class B or C criteria for dams in TR– Missouri is also revising the existing 60, or the size or other criteria of 30 CFR amend the Missouri Code of State provision by requiring that Regulations (CSR) at Title 10, Division 77.216(a), they require that foundation impoundments which do not meet the investigation, as well as any necessary 40. Below is a summary of the changes above criteria be examined at least proposed by Missouri. The full text of laboratory testing of foundation quarterly. material, be performed to determine the the program amendment is available for e. At 10 CSR 40–3.040(10)(A) and 10 design requirements for foundation your inspection at the locations listed CSR 40–3.200(10)(A), Missouri is above under ADDRESSES. stability. Paragraphs (10)(N)2 require adding the following new sentence: that all vegetative and organic materials A. 10 CSR 40–3 Permanent Furthermore, impoundments meeting the be removed and foundations excavated Performance Requirements for Surface Class B or C criteria for dams in TR–60 shall and prepared to resist failure. Cutoff Coal Mining and Related Activities comply with the ‘‘Minimum Emergency trenches must be installed if necessary Spillway Hydrologic Criteria’’ table in TR–60 1. 10 CSR 40–3.010(6) Buffer Zone and the requirements of this section. to ensure stability. Markers. Missouri proposes to add a j. Missouri is adding a new subsection f. At 10 CSR 40–3.040(10)(B)5 and 10 reference to 10 CSR 40–8.010(1)(A)13 in at 10 CSR 40–3.040(10)(O) and 10 CSR CSR 40–3.200(B)5, Missouri proposes to its provision at 10 CSR 40–3.010(6). 40–3.200(10)(O) entitled ‘‘Spillways.’’ remove its current reference to the Missouri’s rule at 10 CSR 40– Subsections (10)(0) provide the spillway ‘‘United States Soil Conservation 8.010(1)(A)13 defines the term ‘‘buffer requirements for permanent and Service Practice Standards 378, Ponds, zone.’’ temporary impoundments meeting the 2. 10 CSR 40–3.020 Requirements January 1991’’ and replace it with a Class B or C criteria for dams in TR–60, for Casing and Sealing of Drilled Holes. reference to the ‘‘United States Natural for impoundments meeting or exceeding Missouri proposes to remove its Resources Conservation Service, the size or other criteria of 30 CFR reference to 10 CSR 40.3.040(13) and to Conservation Practice Standard, Pond, 77.216(a), and for impoundments not add a reference to 10 CSR 40–3.040(14) No. Code 378, December 1998.’’ meeting either criteria. They also and the Wellhead Protection Section, g. Missouri is adding a new specify the design precipitation events Division of Geology and Land Survey, at subsection at 10 CSR 40–3.040(10)(L) that the various types of impoundments 10 CSR 23, Chapter 6, in its provisions and 10 CSR 40–3.200(10)(L) entitled must be designed and constructed to at 10 CSR 40–3.020(1) and (3). ‘‘Stability.’’ Paragraphs (10)(L)1 require safely pass or contain. Provisions of the referenced rules must an impoundment meeting the Class B or k. At 10 CSR 40–3.040(13)(A)1.A, be met in order to use a drilled hole or C criteria for dams in TR–60, or the size Missouri is correcting regulation borehole or monitoring well as a water or other criteria of 30 CFR 77.216(a), to references by changing ‘‘10 CSR 40– well. have a minimum static safety factor of 6.070(13)’’ to ‘‘10 CSR 40–6.070(14)’’ 3. 10 CSR 40–3.040 and 10 CSR 40– 1.5 for a normal pool with steady state and removing a reference to ‘‘10 CSR 3.200 Requirements for Protection of seepage saturation conditions and a 40–6.120(5).’’ At 10 CSR 40– the Hydrologic Balance. Missouri seismic safety factor of at least 1.2. 3.040(13)(B)1, Missouri is correcting a proposes several changes to its rules at Paragraphs (10)(L)2 require an regulation reference by changing ‘‘10 10 CSR 40–3.040 for surface mining impoundment not included in the first CSR 40–6.050(9)(B)4’’ to ‘‘10 CSR 40– operations and 10 CSR 40–3.200 for paragraph, except for a coal mine waste 6.050(9)(C)4.’’ underground mining operations. impounding structure, to have a l. Missouri is revising 10 CSR 40– a. Missouri is changing all instances minimum static safety factor of 1.3 for 3.040(14)(B)3 to require that upon of the term ‘‘sedimentation ponds’’ to a normal pool with steady state seepage transfer of a well, the transferee must the term ‘‘siltation structures’’ in its saturation conditions or meet the assume primary responsibility for rules at 10 CSR 40–3.040(2), 10 CSR 40– requirements of the Natural Resources compliance with 10 CSR 40–3.020 and 3.040(6), 10 CSR 40–3.040(8), 10 CSR Conservation Service, Conservation those provisions of the Wellhead 40–3.040(17), 10 CSR 40–3.200(2), 10 Practice Standard 378, December 1998, Protection Section, Division of Geology CSR 40–3.200(6), 10 CSR 40–3.200(8), and be less than 20 feet in height. and Land Survey, at 10 CSR 23, Chapter and 10 CSR 40–3.200(16). h. Missouri is adding a new 3, applicable to the well. b. At 10 CSR 40–3.040(4)(A), Missouri subsection at 10 CSR 40–3.040(10)(M) m. At 10 CSR 40–3.200(12)(A)1.A, is correcting a rule reference by and 10 CSR 40–3.200(10)(M) entitled Missouri is correcting a regulation changing ‘‘subsection (17)(A)’’ to ‘‘Freeboard.’’ Subsections (10)(M) reference by changing ‘‘10 CSR 40– ‘‘subsection (18)(A).’’ require an impoundment to have 6.070(13)’’ to ‘‘10 CSR 40–6.070(14).’’ At c. At 10 CSR 40–3.040(4)(B)3 and 10 adequate freeboard to resist overtopping 10 CSR 40–3.200(12)(B)1, Missouri is CSR 40–3.200(4)(B)3, Missouri is adding by waves and by sudden increases in correcting a regulation reference by
VerDate 112000 15:43 Oct 30, 2000 Jkt 194001 PO 00000 Frm 00010 Fmt 4702 Sfmt 4702 E:\FR\FM\31OCP1.SGM pfrm11 PsN: 31OCP1 64908 Federal Register / Vol. 65, No. 211 / Tuesday, October 31, 2000 / Proposed Rules changing ‘‘10 CSR 40–6.120(5)(B)3’’ to its approximate original contour. Insufficient All exposed surface areas shall be ‘‘10 CSR 40–6.120(5)(C)3.’’ spoil and other waste materials occur where protected attendant to erosion according to n. Missouri is revising 10 CSR 40– the overburden thickness times the swell 10 CSR 40–3.200(5)(A). 3.200(13)(B)3 to require that upon factor, plus the thickness of other available waste materials, is less than the combined B. 10 CSR 40–4 Permanent transfer of a well, the transferee must thickness of the overburden and coal bed assume primary responsibility for Performance Requirements for Special prior to removing the coal, so that after Mining Activities compliance with 10 CSR 40–3.180 and backfilling and grading the surface those provisions of the Wellhead configuration of the reclaimed area would 1. 10 CSR 40–4.010 Coal Exploration Protection Section, Division of Geology not: (1) Closely resemble the surface Requirements. Missouri is proposing and Land Survey, at 10 CSR 23, Chapter configuration of the land prior to mining; or two changes to its rules concerning coal 3, applicable to the well. (2) Blend into and complement the drainage exploration requirements. pattern of the surrounding terrain. 4. 10 CSR 40–3.050 Requirements a. Missouri is revising its purpose for the Use of Explosives. At 10 CSR 40– b. 10 CSR 40–3.110(5) Thick statement to read as follows: Overburden. Missouri proposes to 3.050(1)(D)1.A, Missouri proposes to This rule sets forth the requirements for require an operator to submit a blast remove the first three sentences of 10 conducting coal exploration activities design if blasting operations will be CSR 40–3.110(5)(A) and add the pursuant to 444.810 and 444.845, RSMo. conducted within 1000 feet of a dam following language in their place: b. Missouri is correcting a citation that is outside the permit area. At 10 The provisions of this section apply only reference at 10 CSR 40–4.010(3)(J) by CSR 40–3.050(2)(A), Missouri proposes where there is more than sufficient spoil and changing the reference from ‘‘10 CSR to require the operator to notify owners other waste materials available from the 40–3.040(8)’’ to ‘‘10 CSR 40–3.040(9).’’ of dams that are located within one-half entire permit area to restore the disturbed 2. 10 CSR 40–4.020 Auger Mining mile of the permit area at least forty area to its approximate original contour. More than sufficient spoil and other waste Requirements. Missouri is correcting a days before initiation of blasting and tell materials occur where the overburden citation reference at 10 CSR 40– them how to request a preblast survey. thickness times the swell factor exceeds the 4.020(2)(B) by changing the reference At 10 CSR 40–3.050(3)(C)1, Missouri combined thickness of the overburden and from ‘‘10 CSR 40–6.060(6)’’ to ‘‘10 CSR removed the language ‘‘at a minimum, coal bed prior to removing the coal, so that 40–6.060(5).’’ shall contain.’’ after backfilling and grading the surface 3. 10 CSR 40–4.030 Operations on 5. 10 CSR 40–3.080 Requirements configuration of the reclaimed area would Prime Farmland. for the Disposal of Coal Processing not: (1) Closely resemble the surface a. Missouri proposes to revise its Waste. Missouri proposes the following configuration of the land prior to mining; or (2) Blend into and complement the drainage purpose statement to read as follows: changes to its requirements for pattern of the surrounding terrain. disposing of coal processing waste. This rule outlines the procedure for surface a. Missouri proposes to revise the first c. 10 CSR 40–3.110(6) Regrading or coal mining and reclamation on prime sentence of 10 CSR 40–3.080(1)(A) to Stabilizing Rills and Gullies. Missouri farmland pursuant to 444.810 and 444.855 read as follows: proposes to revise 10 CSR 40– RSMo. 3.110(6)(B) to read as follows: All coal processing waste disposed of in an b. Missouri proposes to change the area other than the mine workings or On areas that have been previously mined, term ‘‘United States Soil Conservation excavations shall be hauled or conveyed and the requirements for regrading or stabilizing Service’’ to the term ‘‘United States placed for final placement in new or existing rills and gullies pursuant to subsection (6)(A) Natural Resources Conservation disposal areas approved in the permit and apply after final grading and placement of Service’’ at 10 CSR 40–4.030(3)(A), plan for this purpose. topsoil or the best available topsoil (6)(A), and (7)(B)2 and 7. substitute. b. At 10 CSR 40–3.080(3)(D), Missouri c. Missouri proposes to remove its proposes to remove the references to 8. 10 CSR 40–3.120 and 10 CSR 40– current provision at 10 CSR 40– ‘‘10 CSR 40–3.040(12) and (15)’’ and 3.270 Revegetation Requirements. 4.030(4)(A), redesignate 10 CSR 40– add a reference to ‘‘10 CSR 40– Missouri proposes the following 4.030(4)(B) as 10 CSR 40–4.030(4)(C), 3.040(16).’’ changes to its rules at 10 CSR 40–3.120 and add the following new provisions at 6. 10 CSR 40–3.090 Requirements for surface mining operations and 10 10 CSR 40–4.030(4)(A) and (B): CSR 40–3.270 for underground mining for the Protection of Air Resources at (A) Coal preparation plants, support Surface Mining Operations. Missouri operations. facilities, and roads of underground mines a. Missouri proposes to remove the proposes to add the following new that are actively used over extended periods term ‘‘range land’’ from its provisions requirement: of time and where such uses affect a minimal for grazing at 10 CSR 40–3.120(5) and 10 amount of land. Such uses shall meet the All exposed surface areas shall be CSR 40–3.270(5). requirements of 10 CSR 40–3. protected and stabilized to effectively control b. Missouri proposes to replace the (B) Disposal areas containing coal mine erosion and air pollution attendant to erosion term ‘‘sediment ponds’’ with the term waste resulting from underground mines that according to 10 CSR 40–3.040(5)(A). ‘‘siltation structures’’ in its rules at 10 is not technologically and economically 7. 10 CSR 40–3.110 Backfilling and CSR 40–3.120(8)(A)4 and (B) and 10 feasible to store in underground mines or on Grading Requirements. Missouri CSR 40–3.270(8)(A)4 and (B). non-prime farmland. The operator shall proposes the following changes to its 9. 10 CSR 40–3.140 Road and Other minimize the area of prime farmland used for backfilling and grading requirements. Transportation Requirements. At 10 such purposes. a. 10 CSR 40–3.110(4) Thin CSR 40–3.140(1)(A), Missouri proposes 4. 10 CSR 40–4.050 Coal Processing Overburden. Missouri proposes to to remove the word ‘‘road’’ from the Plants and Support Facilities Not remove the first three sentences of 10 phrase ‘‘as well as dust occurring on Located at or Near the Mine Site or Not CSR 40–3.110(4)(A) and add the other exposed road surfaces.’’ Within the Permit Area for a Mine. following language in their place: 10. 10 CSR 40–3.240 Air Resource Missouri proposes to correct the citation The provisions of this section apply only Protection at Underground Mining reference at 10 CSR 40–4.050(11) from where there is insufficient spoil and other Operations. Missouri proposes to ‘‘10 CSR 40–3.100(1)–(4)’’ to ‘‘10 CSR waste materials available from the entire remove the existing requirement and 40–3.100(1)–(7).’’ Missouri also permit area to restore the disturbed area to add the following new requirement: proposes to correct the citation
VerDate 112000 15:43 Oct 30, 2000 Jkt 194001 PO 00000 Frm 00011 Fmt 4702 Sfmt 4702 E:\FR\FM\31OCP1.SGM pfrm11 PsN: 31OCP1 Federal Register / Vol. 65, No. 211 / Tuesday, October 31, 2000 / Proposed Rules 64909 reference at 10 CSR 40–4.050(12) from 2. 10 CSR 40–6.020 General all unabated cessation orders and unabated ‘‘10 CSR 40–3.100(5)’’ to ‘‘10 CSR 40– Requirements for Coal Exploration violation notices received prior to the date of 3.100(8).’’ Permits. Missouri is proposing several the application by any surface coal mining changes to its rule at 10 CSR 40–6.020. and reclamation operation that is deemed or C. 10 CSR 40–5 Prohibitions and presumed to be owned or controlled by the a. Missouri is proposing to revise the Limitations on Mining in Certain Areas applicant under the definition of ‘‘owned or purpose statement to read as follows: and Areas Unsuitable for Mining controlled’’ and ‘‘owns or controls’’ in 10 This rule sets forth the requirements for CSR 40–6.010(2)(E) of this chapter. For each 1. At 10 CSR 40–5.010(1)(B), Missouri coal exploration permits pursuant to 444.810 notice of violation issued pursuant to 10 CSR proposes to revise the first sentence of and 444.845, RSMo. 40–8.030(7) or under the Federal or State its definition of ‘‘No significant program for which the abatement period has b. 10 CSR 40–6.020(5) Requirements recreational, timber, economic or other not expired, the applicant must certify that for Commercial Use or Sale During Coal values incompatible with surface coal such notice of violation is in the process of Exploration. In the first sentence, being corrected to the satisfaction of the mining operations’’ to read as follows: Missouri is proposing to add the words agency with jurisdiction over the violation. Significant recreational, timber, economic ‘‘use or’’ before the word ‘‘sale’’ in the For each violation notice or cessation order or other values incompatible with surface phrase ‘‘for commercial sale.’’ In the reported, the lists shall include the following coal mining operations means those values first sentence, Missouri is also information, as applicable: which could be damaged by, and are not A. Any identifying numbers for the capable of existing together with, surface coal proposing to change the citation operation, including the Federal or State mining operations because of the undesirable references to ‘‘10 CSR 40–6.010 and 10 permit number and MSHA number, the dates effects mining would have on those values, CSR 40–6030 through 10 CSR 40– of the violation notice and MSHA number, either on the area included in the permit 6.120.’’ In the second sentence, Missouri the name of the person to whom the violation application or on other affected area. is proposing to add the word ‘‘written’’ notice was issued, and the name of the before the word ‘‘determination.’’ issuing regulatory authority, department or 2. Missouri proposes to revise the first agency; sentence of 10 CSR 40–5.010(2)(E) to Missouri is also adding a new sentence that reads as follows: B. A brief description of the violation read as follows: alleged in the notice; The person conducting the exploration Within three hundred feet (300′), measured C. The date, location and type of any shall file an application for such horizontally, from any occupied dwelling administrative or judicial proceedings determination with the director or unless the permit applicant submits with the initiated concerning the violation, including, commission. application a written waiver from the owner but not limited to, proceedings initiated by of the dwelling, clarifying that the owner and c. 10 CSR 40–6.020(7) Bonding for any person identified in subsection (C) of this signatory had the legal right to deny mining Coal Exploration Permits. At 10 CSR section to obtain administrative or judicial and knowingly waived that right. review of the violation; 40–6.020(7)(A), Missouri proposes to D. The current status of the proceedings D. 10 CSR 40–6 Permitting change the citation reference to ‘‘10 CSR and of the violation notice; and Requirements for Permits, Permit 40–7.011(6).’’ E. The actions, if any, taken by any person Applications, and Coal Exploration 3. 10 CSR 40–6.030 and 10 CSR 40– identified in subsection (C) of this section to 6.100 Minimum Requirements for abate the violation. 1. 10 CSR 40–6.010 General Legal, Financial, Compliance and Requirements for Permits. Missouri is e. Missouri is revising 10 CSR 40– Related Information. Missouri proposes 6.100(2)(C) to read as follows: proposing the following changes to its the following changes to its rules at 10 rule at 10 CSR 40–6.010. CSR 40–6.030 for surface mining For any violation of a provision of the Act, a. 10 CSR 40–6.010(4)(B)2 Renewal or of any law, rule or regulation of the United operations and 10 CSR 40–6.100 for States, or of any State law, rule or regulation of Valid Permits. Missouri proposes to underground mining operations. correct a citation reference by changing enacted pursuant to Federal law, rule or a. In the introductory paragraph of 10 regulation pertaining to air or water ‘‘10 CSR 40–6.080(5) and (6)’’ to ‘‘10 CSR 40–6.030(1)(C), Missouri proposes environmental protection incurred in CSR 40–6.090(5) and (6).’’ Missouri also to add the phrase ‘‘each application connection with any surface coal mining proposes to add the following new shall contain’’ after the words ‘‘as operation, a list of all violations notices provision to the end of 10 CSR 40– applicable.’’ received by the applicant during the three (3) 6.010(4)(B)2: b. Missouri proposes to revise the year period preceding the application date, and a list of all unabated cessation orders and A permittee need not renew the permit if introductory paragraph of 10 CSR 40– unabated air and water quality violation no surface coal mining operations will be 6.030(1)(D) to read as follows: notices received prior to the date of the conducted under the permit and solely For any surface coal mining operation application by any surface coal mining and reclamation activities remain to be done. owned or controlled by the applicant under reclamation operation owned or controlled Obligations established under a permit the definition of owned or controlled and by either the applicant or by any person who continue until completion of surface coal owns or controls in 10 CSR 40–6.010(2)(E), owns or controls the applicant. For each mining and reclamation operations, each application shall contain— violation notice or cessation order reported, regardless of whether the authorization to the lists shall include the following conduct surface coal mining operations has c. At 10 CSR 40–6.030(1)(I) and 10 information, as applicable: expired or has been terminated, revoked, or CSR 40–6.100(1)(I), Missouri proposes A. Any identifying numbers for the suspended. to require the applicant to submit the operation, including the Federal or State b. 10 CSR 40–6.010(6)(A) Permit Fees. information required by 10 CSR 40– permit number and MSHA number, the dates Missouri proposes to remove the 6.010(1) and (2) and 10 CSR 40–6.100(1) of issuance of the violation notice and MSHA existing third sentence. Missouri also and (2) in any format prescribed by the number, the name of the person to whom the proposes to revise the existing fifth ‘‘Office of Surface Mining Reclamation violation notice was issued, and the name of the issuing regulatory authority, department sentence to read as follows: and Enforcement (OSMRE).’’ d. Missouri is revising 10 CSR 40– or agency; Afterwards and until the operator obtains B. A brief description of the violation the final liability release on all lands covered 6.030(2)(C) to read as follows: alleged in the notice; by the permit, the annual fee and acreage fee A list of all violation notices received by C. The date, location and type of any shall be paid as a condition to and prior to the applicant during the three year period administrative or judicial proceedings operating for that permit year. preceding the application date, and a list of initiated concerning the violation, including,
VerDate 112000 15:43 Oct 30, 2000 Jkt 194001 PO 00000 Frm 00012 Fmt 4702 Sfmt 4702 E:\FR\FM\31OCP1.SGM pfrm11 PsN: 31OCP1 64910 Federal Register / Vol. 65, No. 211 / Tuesday, October 31, 2000 / Proposed Rules but not limited to, proceedings initiated by beginning of the introductory owners within the permit area must be any person identified in subsection (C) of this paragraphs: obtained. section to obtain administrative or judicial 7. 10 CSR 40–6.070 Review, Public review of the violation; Impoundments meeting the Class B or C D. The current status of the proceedings criteria for dams in TR–60, which is Participation and Approval of Permit and of the violation notice; and incorporated by reference, shall comply with Applications and Permit Terms and E. The actions, if any, taken by any person the requirements of this section for structures Conditions. identified in subsection (C) of this section to that meet or exceed the size or other criteria a. At 10 CSR 40–6.070(3)(B), Missouri abate the violation. of the Mine Safety and Health is proposing to require that written Administration (MSHA). 4. 10 CSR 40–6.040 Environmental comments on permit applications be Resources. h. At 10 CSR 40–6.050(11)(A)3 and 10 submitted to the commission and a. 10 CSR 40–6.040(5) Geology CSR 40–6.120(7)(A)3, Missouri is director within 30 days after the last Description. Missouri is revising 10 CSR removing a citation reference to ‘‘30 publication of the newspaper 40–6.040(5)(B)1.E to read as follows: CFR 77.216(a)’’ and adding a citation advertisement required by subsection reference to ‘‘10 CSR 40–6.050(11)(A)2 (2)(A). Analyses of the coal seam for acid- or and 10 CSR 40–6.120(7)(A)2,’’ b. At 10 CSR 40–6.070(4)(A), Missouri toxic-forming materials, including, but not respectively. is proposing to require that written limited to, an analysis of the total sulfur and pyritic sulfur content. i. Missouri is proposing to revise the objections to an initial, renewed, or second sentence of 10 CSR 40– revised application for a permit be filed b. 10 CSR 40–6.040(16) Prime 6.050(11)(C) and 10 CSR 40–6.120(7)(C) within 30 days after the last publication Farmland Investigation. Missouri is to require that each plan for an of the newspaper advertisement revising 10 CSR 40–6.040(16)(C)1 and 3 impoundment meeting the size or other required by subsection (2)(A). by changing its references to the criteria of the Mine Safety and Health c. At 10 CSR 40–6.070(8)(C), Missouri ‘‘United States Soil Conservation Administration comply with the is correcting a citation reference by Service’’ to the ‘‘United States Natural requirements of 30 CFR 77.216–1 and 30 changing ‘‘10 CSR 40–6.050(9)(C)’’ to Resources Conservation Service.’’ CFR 77.216–2. Missouri is adding a new ‘‘10 CSR 40–6.050(9)(E).’’ 5. 10 CSR 40–6.050 and 10 CSR 40– sentence to these sections to require that d. At 10 CSR 40–6.070(10)(D), 6.120 Minimum Requirements for the plan required to be submitted to the Missouri is changing the word ‘‘formal’’ Reclamation and Operations Plan. District Manager of MSHA under 30 to the word ‘‘informal.’’ Missouri proposes the following CFR 77.216 be submitted to the director 8. 10 CSR 40–6.090 Permit Reviews, changes to its rules at 10 CSR 40–6.050 as part of the permit application. Revisions and Renewals. for surface mining operations and 10 j. Missouri is proposing to revise the a. Missouri is revising 10 CSR 40– CSR 40–6.120 for underground mining first sentence of 10 CSR 40–6.050(11)(F) 6.090(4)(B)(2), to require that the scale operations. and 10 CSR 40–6.120(7)(F) by requiring or extent of permit application a. Missouri proposes to change the that if a structure meets the Class B or information requirements and term ‘‘sedimentation pond’’ to the term C criteria for dams in TR–60, or meets procedures, including notice and ‘‘siltation structure’’ in its rules at 10 the size or other criteria of 30 CFR hearings, applicable to revision requests CSR 40–6.050(5)(B)11, 10 CSR 40– 77.216(a), each plan under subsections must be sufficient to demonstrate 6.050(5)(C)1, 10 CSR 40–6.050(11)(A) (11)(B), (C) and (E) and subsections compliance with all applicable rules. and (B), 10 CSR 40–6.120(7)(A) and (B), (7)(B), (C) and (E), respectively, must b. At 10 CSR 40–6.090(6)(A), Missouri and 10 CSR 40–6.120(14)(B)10 and include a stability analysis of each is correcting a citation reference by (C)(1). structure. changing ‘‘10 CSR 40–6.010(4)(B)3’’ to b. At 10 CSR 40–6.050(7)(D)1, k. Missouri is proposing to remove the 10 CSR 40–6.010(4)(B)2.’’ Missouri proposes that each fish and language ‘‘or a qualified registered c. At 10 CSR 40–6.090(7), Missouri is wildlife plan description be consistent professional land surveyor’’ from its correcting a citation reference by with the requirements of this section provisions at 10 CSR 40–6.050(17)(B) changing ‘‘10 CSR 40–6.070(11)’’ to ‘‘10 and 10 CSR 40–3.100. and 10 CSR 40–6.120(15)(B). CSR 40–6.070(12).’’ c. At 10 CSR 40–6.050(9)(C)3, l. At 10 CSR 40–6.120(12)(D), Missouri is changing a citation reference E. 10 CSR 40–7 Bond and Insurance Missouri proposes that each fish and Requirements from ‘‘10 CSR 40–3.040(11)’’ to ‘‘10 CSR wildlife plan description be consistent 40–3.040(12).’’ with the requirements of this section 1. 10 CSR 40–7.011 Bond d. At 10 CSR 40–6.050(9)(C)4, and 10 CSR 40–3.250. Requirements. Missouri is changing a citation reference 6. 10 CSR 40–6.060(4) Prime a. At 10 CSR 40–7.011(6)(A)8 and from ‘‘10 CSR 40–3.040(12)’’ to ‘‘10 CSR Farmlands. (D)8, Missouri is proposing to require 40–3.040(13).’’ a. Missouri is proposing to change all that if a cessation order is issued, e. Missouri is redesignating the instances of its references to the ‘‘United mining operations shall not resume introductory paragraph of ‘‘10 CSR 40– States Soil Conservation Service’’ and until the director has determined that an 6.050(9)(E)’’ as ‘‘10 CSR 40– the ‘‘SCS’’ to the ‘‘United States Natural acceptable bond has been posted. 6.050(9)(D)3’’ and adding a new heading Resources Conservation Service’’ and b. At the end of 10 CSR 40– entitled ‘‘Cumulative Hydrologic Impact the ‘‘NRCS,’’ respectively. 7.011(6)(D)2.C.(II), Missouri is changing Assessment’’ at 10 CSR 40–6.050(9)(E) b. At 10 CSR 40–6.060(4)(E)5, the word ‘‘and’’ to the word ‘‘or.’’ and 10 CSR 40–6.120(5)(E). Missouri is proposing to add the c. Missouri is proposing to revise 10 f. At 10 CSR 40–6.050(11)(A) and 10 following new provision: CSR 40–7.011(6)(D)5.A by changing the CSR 40–6.120(7)(A), Missouri is phrase ‘‘including the parent corporate proposing to add the words ‘‘and a Water bodies, if any, to be constructed guarantor, a third-party nonparent during mining and reclamation operations detailed plan’’ after the words ‘‘general must be located within the post-reclamation corporate guarantor, or both’’ to the plan.’’ non-prime farmland portions of the permit phrase ‘‘including the parent and g. At 10 CSR 40–6.050(11)(A)2 and 10 area. The creation of any such water bodies nonparent corporations.’’ CSR 40–6.120(7)(A)2, Missouri is must be approved by the regulatory authority d. Missouri is proposing to revise 10 adding the following sentence to the and the consent of all affected property CSR 40–7.011(6)(D)5.C by changing the
VerDate 112000 15:43 Oct 30, 2000 Jkt 194001 PO 00000 Frm 00013 Fmt 4702 Sfmt 4702 E:\FR\FM\31OCP1.SGM pfrm11 PsN: 31OCP1 Federal Register / Vol. 65, No. 211 / Tuesday, October 31, 2000 / Proposed Rules 64911 language ‘‘parent or nonparent corporate d. At 10 CSR 40–8.010(1)(A)59, In lieu of the inspection frequency guarantor’’ to the language ‘‘parent and Missouri is revising its definition of established in subsections (1)(A) and (B) of nonparent corporation.’’ ‘‘other treatment facilities’’ as follows: this rule, the regulatory authority shall inspect each abandoned site on a set 2. 10 CSR 40–7.021 Duration and Other treatment facilities means any frequency commensurate with the public Release of Reclamation Liability. chemical treatments, such a flocculation or health and safety and environmental a. Missouri is proposing to remove its neutralization, or mechanical structures, considerations present at each specific site, provisions at 10 CSR 40–7.021(2)(B)5 such as clarifiers or precipitators, that have but in no case shall the inspection frequency and 6 and add them at 10 CSR 40– a point source discharge and that are be set at less than one complete inspection 7.021(1)(C) and (D). utilized— per calendar year. b. Missouri is proposing to replace the A. To prevent additional contributions of 1. In selecting an alternate inspection dissolved or suspended solids to stream flow term ‘‘sediment ponds’’ with the term frequency authorized under the subsection or runoff outside the permit area; or above, the regulatory authority shall first ‘‘siltation structures’’ in 10 CSR 40– B. To comply with all applicable State and conduct a complete inspection of the 7.021(2)(A). Federal water-quality laws and regulations. abandoned site and provide public notice c. Missouri is proposing to add the e. At 10 CSR 40–8.010(1)(A)73, under paragraph (G)2 of this section. following new provisions at 10 CSR 40– Following the inspection and public notice, Missouri is revising in definition of 7.021(3)(C) and (D): the regulatory authority shall prepare and ‘‘prime farmland’’ as follows: maintain for public review a written finding (C) At the time of final or phase III bond justifying the alternative inspection release submittal, the operator shall include Prime farmland means land which meets the technical criteria established by the frequency selected. This written finding shall evidence that an affidavit has been recorded justify the new inspection frequency by with the recorder of deeds in the county Secretary of Agriculture in 7 CFR 657 (FR Vol. 4, No. 21) and which has historically affirmatively addressing in detail all of the where the mined land is located generally following criteria: describing the parcel or parcels of land where been used for cropland as that phrase is defined above. A. How the site meets each of the criteria operations such as underground mining, under the definition of an abandoned site auger mining, covering of slurry ponds, or f. At 10 CSR 40–8.010(1)(A)82, under subsection (F) of this section and other underground activities occurred which Missouri is adding the following thereby qualifies for a reduction in could impact or limit future use of that land. definition of ‘‘regulatory authority’’: inspection frequency; This requirement shall be applicable to Regulatory authority means the Land B. Whether, and to what extent, there exist mined land where phase I reclamation was on the site impoundments, earthen structures completed on or after September 1, 1992. Reclamation Commission, the director, or their designated representative and or other conditions that currently pose, or (D) Notarized Statement of Accomplished may reasonably be expected to pose, Reclamation. The permittee shall include in employees unless otherwise specified in these rules. imminent dangers to the health or safety of the application for reclamation liability the public or significant environmental release a notarized statement which certifies g. Missouri is proposing to remove its harms to land, air, or water resources; that all applicable reclamation activities have definition for ‘‘sedimentation pond’’ at C. The extent to which existing been accomplished in accordance with the 10 CSR 40–8.010(1)(A)(87) and to add impoundments or earthen structures were requirements of the Surface Coal Mining constructed and certified in accordance with Law, the regulatory program, and the the following definition for ‘‘siltation structure’’ at 10 CSR 40–8.010(1)(A)(89): prudent engineering designs approved in the approved reclamation plan. Such permit; certification shall be submitted for each Siltation structure means a sedimentation D. The degree to which erosion and application and each phase of bond release. pond, a series of sedimentation ponds, or sediment control is present and functioning; F. 10 CSR 40–8 Definitions and other treatment facility, it also means a E. The extent to which the site is located primary sediment control structure designed, General Requirements near or above urbanized areas, communities, constructed and maintained in accordance occupied dwellings, schools and other public 1. 10 CSR 40–8.010 Definitions. with 10 CSR 40–3.040(6) and including, but or commercial buildings and facilities; a. At 10 CSR 40–8.010(1)(A)9, not limited to, barrier, dam or excavated F. The extent of reclamation completed Missouri is correcting its definition of depression which slows down water runoff prior to abandonment and the degree of to allow sediment to settle out. A siltation stability of unreclaimed areas, taking into ‘‘approximate original contour’’ by structure shall not include secondary adding the language ‘‘piles eliminated’’ consideration the physical characteristics of sedimentation control structures, such as the land mined and the extent of settlement after the word ‘‘refuse’’ to end the first straw dikes, riprap, check dams, mulches, or revegetation that has occurred naturally sentence and adding the language dugouts and other measures that reduce with time; and ‘‘Permanent water impoundments’’ overland flow velocity, reduce runoff volume G. Based on a review of the complete and before the words ‘‘may be permitted’’ to or trap sediment, to the extent that those partial inspection report record for the site begin a second sentence. Missouri is secondary sedimentation structures drain to during at least the last two consecutive years, also replacing its reference to ‘‘10 CSR the siltation structure. the rate at which adverse environmental or 40–3.049(9) and (16)’’ with a reference h. At 10 CSR 40–8.010(1)(A)97.B, public health and safety conditions have and to ‘‘10 CSR 40–3.040(10) and (17).’’ Missouri is correcting a citation can be expected to progressively deteriorate. b. At 10 CSR 40–8.010(1)(A)12, 2. Provide the public notice and reference in its definition of ‘‘surface opportunity to comment required under Missouri is revising its definition of coal mining operations’’ by replacing a subparagraph (G).1 of this section as follows: ‘‘best technology currently available’’ by reference to ‘‘subparagraph (1)(A)14’’ A. The regulatory authority shall place a replacing the term ‘‘sedimentation with a reference to ‘‘subparagraph notice in the newspaper with the broadest ponds’’ with the term ‘‘siltation (1)(A)98.A.’’ circulation in the locality of the abandoned structures.’’ 2. 10 CSR 40–8.030 Permanent site providing the public with a 30-day c. At 10 CSR 40–8.010(1)(A)52.C, Program Inspection and Enforcement. period in which to submit written comments. Missouri is revising its definition of a. Missouri is proposing to revise 10 B. The public notice shall contain the ‘‘land use’’ by adding the information CSR 40–8.030(1)(F)4.A by allowing a permittee’s name, the permit number, the precise location of the land affected, the ‘‘(now known as the Natural Resources site to be classified as abandoned only inspection frequency proposed, the general Conservation Service)’’ after the term in cases where a permit has either reasons for reducing the inspection ‘‘Soil Conservation Service’’ in its expired or been revoked. frequency, the bond status of the permit, the secondary definition of ‘‘prime b. Missouri is revising 10 CSR 40– telephone number and the address of the farmland.’’ 8.030(1)(G) to read as follows: regulatory authority where written comments
VerDate 112000 15:43 Oct 30, 2000 Jkt 194001 PO 00000 Frm 00014 Fmt 4702 Sfmt 4702 E:\FR\FM\31OCP1.SGM pfrm11 PsN: 31OCP1 64912 Federal Register / Vol. 65, No. 211 / Tuesday, October 31, 2000 / Proposed Rules on the reduced inspection frequency may be information and plans for any other (G) Following a termination of jurisdiction submitted, and the closing date of the environmental values required by the under subsection (F) of this rule, the comment period. regulatory authority under the act. commission shall reassert jurisdiction under the regulatory program over a site if it is c. At 10 CSR 40–8.030(6)(A)3, h. Missouri is revising the demonstrated that the determination made Missouri replaced a reference to introductory paragraph to 10 CSR 40– under subsection (F) of this rule, or the ‘‘paragraph (7)(A)1 of this section’’ with 8.050(9)(A) to read as follows: release of Phase III reclamation liability a reference to ‘‘paragraph (6)(A)1 of this A coal operator who has received referred to under paragraph (F) of this rule rule.’’ assistance pursuant to section (5) of this rule, was based upon fraud, collusion, or d. At 10 CSR 40–8.030(12)(C), shall reimburse the director or commission misrepresentation of a material fact. Missouri replaced a reference to for the cost of the services rendered if— G. 10 CSR 40–9.020 Abandoned Mine ‘‘subsection (8)(E)’’ with a reference to i. Missouri is proposing to revise 10 Reclamation and Restoration; ‘‘10 CSR 40–7.031.’’ CSR 40–8.050(9)(A)2 to read as follows: Reclamation 3. 10 CSR 40–8.050 Small Operators’ The director or commission finds that the 1. Missouri proposes to revise the first Assistance Program (SOAP). operator’s actual and attributed annual a. Missouri proposes to revise its sentence of 10 CSR 40–9.020(1)(D)4 to production of coal for all locations exceeds read as follows: definition of ‘‘qualified laboratory’’ at 10 three hundred thousand (300,000) tons CSR 40–8.050(1) by replacing the phrase during the twelve (12) months immediately The commission finds in writing that the ‘‘which can prepare’’ with the phrase following the date on which the operator is site meets the eligibility requirements of this ‘‘that can provide’’ and by adding the issued the surface coal mining and section and the priority objectives stated in phrase ‘‘or other services as specified in reclamation permit; or subsections (4)(A) and (B) of this rule and that the reclamation priority of the site is the section (5) of this rule’’ after the term j. Missouri is proposing to revise the same or more urgent than the reclamation ‘‘core samplings.’’ first sentence of 10 CSR 40–8.050(9)(A)3 priority for other lands and waters eligible b. Missouri proposes to revise the first to read as follows: pursuant to this section. sentence of 10 CSR 40–8.050(2)(B) to The permit is sold, transferred or assigned 2. Missouri proposes to add the read as follows: to another person and the transferee’s total following new provision at 10 CSR 40– Establishes that his/her probable total actual and attributed production exceeds the 9.020(1)(F): attributed annual production from all three hundred thousand (300,000)-ton annual locations on which the operator is issued the production limit during the twelve (12) If reclamation of a site covered by an surface coal mining and reclamation permit months immediately following the date on interim or permanent program permit is will not exceed three hundred thousand which the permit was originally issued. carried out under the State reclamation (300,000) tons. program, the permittee of the site shall 4. 10 CSR 40–8.070 Applicability reimburse the abandoned mine land c. At 10 CSR 40–8.050(2)(B)1 and 2, and General Performance Requirements reclamation fund for the cost of the Missouri proposes to increase from 5 to a. At 10 CSR 40–8.070(2)(C)1.A.(II), reclamation that is in excess of any bond 10 percent the baseline percentage Missouri is replacing a reference to forfeited to ensure reclamation. In performing above which ownership will play a role ‘‘paragraph (2)(C)10’’ with a reference to reclamation under subsection (1)(D) of this in determining ‘‘attributed coal ‘‘paragraph (2)(C)11.’’ rule, the commission shall not be held liable b. At 10 CSR 40–8.070(2)(C)1.A.(II)(a), for any violations of any performance production.’’ standards or reclamation requirements d. At 10 CSR 40–8.050(5)(A), Missouri Missouri is proposing to change the end of the period for which cumulative specified in Chapter 444 RSMo (1994) nor proposes to add the phrase ‘‘and shall a reclamation activity undertaken on provide other services’’ after the word production and revenue is calculated for such lands or waters be held to any standards ‘‘statement.’’ coal or other minerals from ‘‘extracted set forth in Chapter 444 RSMo (1994). e. At 10 CSR 40–8.050(5)(B)1, prior to November 1, 1992, and every Missouri proposes to add the phrase October after that’’ to ‘‘extracted prior to III. Public Comment Procedures October 1, 1992, September 30, 1992 ‘‘including the engineering analysis and Under the provisions of 30 CFR and every September 30 after that.’’ designs necessary for the 732.17(h) and 884.15(a), we are seeking c. At 10 CSR 40–8.070(2)(C)10.F(I), determination’’ after the term ‘‘adjacent comments on whether the proposed (II), and (III), Missouri replaced the term areas.’’ amendment satisfies the applicable ‘‘commission’’ with the term ‘‘regulatory f. Missouri is revising 10 CSR 40– program approval criteria of 30 CFR 8.050(5)(B)2 to specify that drilling to program.’’ d. Missouri proposed the following 732.15 and 884.14. If we approve the provide rock samples is an authorized new provisions at 10 CSR 40– amendment, it will become part of the service under its SOAP rules. 8.070(2)(F) and (G): Missouri program. g. Missouri is proposing to add the Written Comments: If you submit following new authorized services (F) The commission may terminate its written or electronic comments on the under its SOAP rules at 10 CSR 40– jurisdiction under the regulatory program proposed rule during the 30-day 8.050(5)(B)3, 4, 5, and 6: over the reclaimed site of a completed comment period, they should be surface coal mining and reclamation 3. The development of cross-section maps operation, or portion thereof, when: specific, should be confined to issues and plans required by 10 CSR 40–6.040(15); 1. The commission or director determines pertinent to the notice, and should 4. The collection of archaeological and in writing that under the initial program, all explain the reason for your historic information and related plans requirements imposed under 10 CSR 40–2, recommendation(s). We may not be able required by 10 CSR 40–6.040(3)(B) and 10 10 CSR 40–3, 10 CSR 40–4 and 10 CSR 40– to consider or include in the CSR 40–6.050(14) and any other 8 have been successfully completed; or Administrative Record comments archaeological and historic information 2. The commission or director determines delivered to an address other than the required by the regulatory authority; in writing that all requirements imposed one listed above (see ADDRESSES). 5. Pre-blast surveys required by 10 CSR 40– under 10 CSR 40 chapters 3 through 8 have 6.050(4); and been successfully completed, and, Electronic Comments: Please submit 6. The collection of site-specific resources 3. The operator has properly applied for, Internet comments as an ASCII, information, the production of protection and and obtained release of Phase III reclamation WordPerfect, or Word file avoiding the enhancement plans for fish and wildlife liability in accordance with 10 CSR 40– use of special characters and any form habitats required by 10 CSR 40–6.050(7) and 7.021(3) through (5). of encryption. Please also include ‘‘Attn:
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SPATS NO. MO–033–FOR’’ and your by contacting the person listed under must be based solely on a determination name and return address in your FOR FURTHER INFORMATION CONTACT. All of whether the submittal is consistent Internet message. If you do not receive such meetings are open to the public with SMCRA and its implementing a confirmation that we have received and, if possible, we will post notices of Federal regulations and whether the your Internet message, contact the Mid- meetings at the locations listed under other requirements of 30 CFR Parts 730, Continent Regional Coordinating Center ADDRESSES. We will also make a written 731, and 732 have been met. Decisions at (618) 463–6460. summary of each meeting a part of the on proposed abandoned mine land Availability of Comments: Our Administrative Record. reclamation plans and revisions practice is to make comments, including IV. Procedural Determinations submitted by a State or Tribe are based names and home addresses of on a determination of whether the respondents, available for public review Executive Order 12866—Regulatory submittal meets the requirements of during regular business hours at OSM’s Planning and Review Title IV of SMCRA (30 U.S.C. 1231– Mid-Continent Regional Coordinating This rule is exempted from review by 1243) and 30 CFR Part 884 of the Center (see ADDRESSES). Individual the Office of Management and Budget Federal regulations. respondents may request that we under Executive Order 12866. withhold their home address from the National Environmental Policy Act administrative record, which we will Executive Order 12630—Takings Section 702(d) of SMCRA (30 U.S.C. honor to the extent allowable by law. This rule does not have takings 1292(d)) provides that a decision on a There also may be circumstances in implications. This determination is proposed State regulatory program which we would withhold from the based on the analysis performed for the provision does not constitute a major administrative record a respondent’s counterpart Federal regulations. identity, as allowable by law. If you Federal action within the meaning of wish us to withhold your name and/or Executive Order 13132—Federalism section 102(2)(C) of the National address, you must state this This rule does not have federalism Environmental Policy Act (NEPA) (42 prominently at the beginning of your implications. SMCRA delineates the U.S.C. 4332(2)(C)). A determination has comment. However, we will not roles of the Federal and State been made that such decisions are consider anonymous comments. We governments with regard to the categorically excluded from the NEPA will make all submissions from regulation of surface coal mining and process (516 DM 8.4.A). Agency organizations or businesses, and from reclamation operations. One of the decisions on proposed State and Tribal individuals identifying themselves as purposes of SMCRA is to ‘‘establish a abandoned mine land reclamation plans representatives or officials of nationwide program to protect society and revisions are also categorically organizations or businesses, available and the environment from the adverse excluded from compliance with the for public inspection in their entirety. effects of surface coal mining National Environmental Policy Act (42 Public Hearing: If you wish to speak operations.’’ Section 503(a)(1) of U.S.C. 4332) by the Manual of the at the public hearing, contact the person SMCRA requires that State laws Department of the Interior (516 DM 6, listed under FOR FURTHER INFORMATION regulating surface coal mining and appendix 8, paragraph 8.4B(29)). CONTACT by 4:00 p.m., c.s.t. on reclamation operations be ‘‘in November 15, 2000. We will arrange the accordance with’’ the requirements of Paperwork Reduction Act location and time of the hearing with SMCRA, and section 503(a)(7) requires This rule does not contain those persons requesting the hearing. If that State programs contain rules and information collection requirements that no one requests an opportunity to speak regulations ‘‘consistent with’’ require approval by the Office of at the public hearing, the hearing will regulations issued by the Secretary Management and Budget under the not be held. under SMCRA. Section 405(d) of Paperwork Reduction Act (44 U.S.C. To assist the transcriber and ensure an SMCRA requires State abandoned mine 3507 et seq.). accurate record, we request, if possible, reclamation programs to be in that each person who speaks at a public compliance with the procedures, Regulatory Flexibility Act hearing provide us with a written copy guidelines, and requirements of of his or her testimony. The public SMCRA. The Department of the Interior has hearing will continue on the specified determined that this rule will not have date until all persons scheduled to Executive Order 12988—Civil Justice a significant economic impact on a speak have been heard. If you are in the Reform substantial number of small entities audience and have not been scheduled The Department of the Interior has under the Regulatory Flexibility Act (5 to speak and wish to do so, you will be conducted the reviews required by U.S.C. 601 et seq.). The State submittal allowed to speak after those who have section 3 of Executive Order 12988 and which is the subject of this rule is based been scheduled. We will end the has determined that, to the extent upon counterpart Federal regulations for hearing after all persons scheduled to allowed by law, this rule meets the which an economic analysis was speak and persons present in the applicable standards of subsections (a) prepared and certification made that audience who wish to speak have been and (b) of that section. However, these such regulations would not have a heard. If you are disabled and need a standards are not applicable to the significant economic effect upon a special accommodation to attend a actual language of State regulatory substantial number of small entities. public hearing, contact the person listed programs and program amendments Accordingly, this rule will ensure that under FOR FURTHER INFORMATION since each such program is drafted and existing requirements previously CONTACT. promulgated by a specific State, not by promulgated by OSM will be Public Meeting: If only one person OSM. Under sections 503 and 505 of implemented by the State. In making the requests an opportunity to speak at a SMCRA (30 U.S.C. 1253 and 1255) and determination as to whether this rule hearing, a public meeting, rather than a 30 CFR 730.11, 732.15, and would have a significant economic public hearing, may be held. If you wish 732.17(h)(10), decisions on proposed impact, the Department relied upon the to meet with us to discuss the proposed State regulatory programs and program data and assumptions for the amendment, you may request a meeting amendments submitted by the States counterpart Federal regulations.
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Small Business Regulatory Enforcement ( NOX) rules for electric generating Table of Contents Fairness Act facilities in East and Central Texas. 1. What are we proposing to approve? This rule is not a major rule under 5 These new limits for electric generating 2. What does the April 30, 2000, SIP revision facilities in East and Central Texas will for electric generating facilities in East U.S.C. 804(2), the Small Business and Central Texas say? Regulatory Enforcement Fairness Act. contribute to attainment of the 1-hour ozone National Ambient Air Quality 3. What does the April 30, 2000, SIP revision This rule: for cement kilns in East and Central a. Does not have an annual effect on Standard (NAAQS) in the Houston/ Texas say? the economy of $100 million. Galveston (H/GA), Dallas/Fort Worth 4. What does the April 30, 2000, SIP revision b. Will not cause a major increase in (D/FW), and Beaumont/Port Arthur (B/ for major stationary sources in the D/FW costs or prices for consumers, PA) 1-hour ozone nonattainment areas. area say? individual industries, federal, state, or They will also contribute to continued 5. What are the existing NOX emissions specifications in the Texas SIP? local government agencies, or maintenance of the standard in the eastern half of Texas and will strengthen 6. What are NOX? geographic regions. 7. What is a nonattainment area? c. Does not have significant adverse the existing Texas SIP. 8. What are definitions of major sources for Second, we are proposing to approve effects on competition, employment, NOX? investment, productivity, innovation, or revisions to the Texas NOX rules for 9. What is a State Implementation Plan? the ability of U.S. based enterprises to cement kilns in East and Central Texas. 10. What is the Federal approval process for compete with foreign-based enterprises. These rule revisions will contribute to a SIP? attainment of the 1-hour ozone standard 11. What does Federal approval of a SIP This determination is based upon the mean to me? fact that the State submittal which is the in the D/FW area, will contribute to continued maintenance of the standard 12. What areas in Texas will this action subject of this rule is based upon affect? counterpart Federal regulations for in the eastern half of the State of Texas, Throughout this document ‘‘we,’’ ‘‘us,’’ which an analysis was prepared and a and will strengthen the existing Texas and ‘‘our’’ means EPA. SIP. determination made that the Federal 1. What Are We Proposing To Approve? regulation was not considered a major Third, we are proposing to approve rule. revisions to the Texas NOX rules for On April 30, 2000, the Governor of major stationary sources in the D/FW 1- Texas submitted rule revisions to the 30 Unfunded Mandates hour ozone nonattainment area. These TAC, Chapter 117, ‘‘Control of Air This rule will not impose a cost of new limits for stationary sources will Pollution From Nitrogen Compounds,’’ $100 million or more in any given year contribute to attainment of the 1-hour as a revision to the SIP for electric on any governmental entity or the ozone standard in the D/FW generating facilities in East and Central private sector. nonattainment area. Texas. Texas submitted this revision to The EPA is proposing approval of us as a part of the attainment plans for List of Subjects in 30 CFR Part 925 these SIP revisions to regulate emissions the D/FW, B/PA, and H/GA 1-hour Intergovernmental relations, Surface of NOX as meeting the requirements of ozone nonattainment areas. The revision mining, Underground mining. the Federal Clean Air Act (the Act). also contributes to continued maintenance of the standard in the Dated: October 24, 2000. DATES: Comments must be received on or before November 30, 2000. eastern half of the State of Texas, and it Malcolm Ahrens, is a strengthening of the existing Texas ADDRESSES: Your comments on this Acting Regional Director, Mid-Continent SIP. Regional Coordinating Center. action should be addressed to Mr. On April 30, 2000, the Governor of [FR Doc. 00–27919 Filed 10–30–00; 8:45 am] Thomas H. Diggs, Chief, Air Planning Texas submitted rule revisions to the 30 BILLING CODE 4310±05±P Section, Environmental Protection TAC, Chapter 117, ‘‘Control of Air Agency, Region 6, 1445 Ross Avenue, Pollution From Nitrogen Compounds,’’ Suite 700, Dallas, Texas 75202–2733. as a revision to the SIP for cement kilns ENVIRONMENTAL PROTECTION Copies of the documents about this in East and Central Texas. Texas AGENCY action including the Technical Support submitted this revision to us as a part Document, are available for public of the NOX reductions needed for the 40 CFR Part 52 inspection during normal business continued maintenance of the 1-hour hours at the above and following [TX±119±2±7472; FRL±6893±5] ozone standard in the eastern half of the locations. Persons interested in State and for the D/FW area to attain the Approval and Promulgation of examining these documents should 1-hour ozone standard, and as a Implementation Plans; Texas; Electric make an appointment with the strengthening of the existing Texas SIP. Generating Facilities; Cement Kilns; appropriate office at least 24 hours On April 30, 2000, the Governor of and Major Stationary Sources of before the visiting day. Texas submitted rule revisions to the 30 Nitrogen Oxides for the Dallas/Fort Environmental Protection Agency, TAC, Chapter 117, ‘‘Control of Air Worth Ozone Nonattainment Area Region 6, 1445 Ross Avenue, Suite 700, Pollution From Nitrogen Compounds,’’ Dallas, Texas 75202–2733. as a revision to the SIP for major AGENCY: Environmental Protection Texas Natural Resource Conservation stationary sources operating in the D/ Agency (EPA). Commission, Office of Air Quality, FW 1-hour ozone nonattainment area. ACTION: Proposed approval. 12124 Park 35 Circle, Austin, Texas Texas submitted this revision to us as a 78753. part of the NOX reductions needed for SUMMARY: The EPA is proposing the D/FW area to attain the 1-hour FOR FURTHER INFORMATION CONTACT: Mr. approval of rules into the Texas State ozone standard. Implementation Plan (SIP). This Alan Shar, P.E., Air Planning Section We are proposing three separate rulemaking covers three separate (6PD–L), EPA Region 6, 1445 Ross actions: actions. Avenue, Dallas, Texas 75202–2733, (1) We are specifically proposing to First, we are proposing to approve telephone (214)665–6691. approve new sections 117.131 revisions to the Texas Nitrogen Oxides SUPPLEMENTARY INFORMATION:
VerDate 112000 15:43 Oct 30, 2000 Jkt 194001 PO 00000 Frm 00017 Fmt 4702 Sfmt 4702 E:\FR\FM\31OCP1.SGM pfrm11 PsN: 31OCP1 Federal Register / Vol. 65, No. 211 / Tuesday, October 31, 2000 / Proposed Rules 64915 concerning Applicability, 117.133 concerning Cement Kiln Definitions, concerning Final Control Plan concerning Exemptions, 117.134 117.261 concerning Applicability, Procedures for Attainment concerning Gas Fired Steam Generation, 117.265 concerning Emission Demonstration Emission Specifications 117.135 concerning Emission Specifications, 117.273 concerning as they relate to the D/FW 1-hour ozone Specification, 117.138 concerning Continuous Demonstration of nonattainment area, revisions to the System Cap, 117.141 concerning Initial Compliance, 117.279 concerning existing SIP-approved sections Demonstration of Compliance, 117.143 Notification, Recordkeeping, and 117.101—117.121, 117.201—117.223, concerning Continuous Demonstration Reporting Requirements, 117.283 117.510, 117.520, and 117.570 as they of Compliance, 117.145 concerning concerning Source Cap, and 117.524 relate to the D/FW 1-hour ozone Final Control Plan Procedures, 117.147 concerning Compliance Schedule for nonattainment area, and the repeal of concerning Revision of Final Control Cement Kilns. We are proposing existing SIP-approved sections 117.109, Plan, 117.149 concerning Notification, approval of these cement kiln rule Recordkeeping, and Reporting revisions under part D of the Act and 117.601 for the nonattainment areas. We are proposing approval of Requirements, 117.512 concerning because Texas is relying on these NOX Compliance Schedule for Utility Electric reductions to demonstrate attainment of these D/FW NOX point source rule Generation in East and Central Texas, the 1-hour ozone standard for the D/FW revisions under part D of the Act and a revision to the existing SIP- 1-hour ozone nonattainment area. We because Texas is relying on these NOX approved section 117.10 concerning are also proposing to approve these rule control measures for major stationary Definitions. We are proposing approval revisions under sections 110 and 116 sources in the D/FW area to demonstrate of these rule revisions under part D of because they contribute to continued attainment of the 1-hour ozone standard the Act because Texas is relying on maintenance of the standard in the in the D/FW ozone nonattainment area. these NOX reductions to demonstrate eastern half of the State and they attainment of the 1-hour ozone standard strengthen the existing Texas SIP; and 2. What Does the April 30, 2000, SIP in the H/GA, B/PA, and D/FW 1-hour (3) We are specifically proposing to Revision for Electric Generating ozone nonattainment areas in the State approve new sections 117.104 Facilities in East and Central Texas of Texas. We are also proposing concerning Gas-Fired Steam Generation, Say? 117.106 concerning Emission approval under sections 110 and 116 of This rule revision requires reductions the Act because the State is relying Specifications for Attainment of NOX from electric utility power upon the NOX reductions to show Demonstrations, 117.108 concerning continued maintenance of the standard System Cap, 117.116 concerning Final boilers and gas turbines in East and in the eastern half of the State of Texas Control Plan Procedures for Attainment Central Texas. The following two tables and as a strengthening of the existing Demonstration Emission Specifications, contain a summary of the April 30, Texas SIP; 117.206 concerning Emission 2000, SIP revision for electric generating (2) We are specifically proposing to Specifications for Attainment facilities and gas turbines in East and approve new sections 117.260 Demonstrations, and 117.216 Central Texas.
TABLE I.ÐAFFECTED SOURCES AND NOX EMISSION SPECIFICATIONS FOR UTILITY POWER BOILERS AND GAS TURBINES IN EAST AND CENTRAL TEXAS
Source NOX emission specification Explanation
Electric power boilers ...... 0.14 (lb/MMBtu) ...... Gas fired, annual (calendar) average. Electric power boilers ...... 0.165 (lb/MMBtu) ...... Coal fired, annual (calendar) average. Stationary gas turbines ...... 0.14 (lb/MMBtu) ...... If subject to Texas Utility Commission (TUC), Section 39.264. Stationary gas turbines ...... 0.15 (lb/MMBtu) ...... If not subject to TUC, Section 39.264, or 42 ppmv NOX adjusted to 15% oxygen on a dry basis as an alternate specification. If subject to Texas Senate Bill 7 of 1997, then 0.14 (lb/MMBtu).
We are of the opinion that these We are of the opinion that the above in the eastern half of the State of Texas emission specifications are in agreement listed compliance dates are as and they strengthen the existing Texas with those of the Ozone Transport expeditious as practicable compared SIP. Assessment Group (OTAG). See 63 FR with the compliance dates for similar 49446, published on September 16, sources in serious and severe ozone 3. What Does the April 30, 2000, SIP 1998. nonattainment areas in the country. Revision for Cement Kilns in East and We are proposing approval of the NOX Central Texas Say? TABLE II.ÐAFFECTED SOURCES AND emission specifications and compliance This rule revision requires reductions THEIR COMPLIANCE SCHEDULES FOR dates for electric generating facilities in of NO from cement kilns operating in East and Central Texas as a part of the X UTILITY POWER BOILERS AND GAS East and Central Texas. The following TURBINES IN EAST AND CENTRAL Texas 1-hour ozone SIP under part D of the Act because the State is relying on two tables contain a summary of the TEXAS April 30, 2000, SIP revision for cement the NOX control measures to kilns operating in East and Central Compliance demonstrate attainment of the 1-hour Source schedule ozone standard in the H/GA, B/PA, and Texas. D/FW ozone nonattainment areas in the Electric generating units May 1, 2003. State of Texas. We are also proposing owned by utilities and approval of these rules under sections subject to TUC 39.263(b). All other units ...... May 1, 2005. 110 and 116 because they contribute to continued maintenance of the standard
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TABLE III.ÐAFFECTED SOURCES, LOCATIONS, AND NOX EMISSION SPECIFICATIONS FOR CEMENT KILNS
Source County NOX emission specification
Long wet kiln ...... Bexar, Comal, Hays, McLennan ...... 6.0 lb/ton of clinker produced. Long wet kiln ...... Ellis ...... 4.0 lb/ton of clinker produced. Long dry kiln ...... Bexar, Comal, Hays, McLennan, Ellis ...... 5.1 lb/ton of clinker produced. Preheater kiln ...... Bexar, Comal, Hays, McLennan, Ellis ...... 3.8 lb/ton of clinker produced. Precalciner or preheater- Bexar, Comal, Hays, McLennan, Ellis ...... 2.8 lb/ton of clinker produced. precalciner kiln.
TABLE IV.ÐAFFECTED SOURCES AND areas in the country. We are proposing stationary sources operating in the THEIR COMPLIANCE SCHEDULES FOR approval of the NOX emission D/FW ozone nonattainment area. The CEMENT KILNS specifications and compliance dates for following three tables contain a cement kilns as a part of the Texas 1- summary of the April 30, 2000, SIP hour ozone SIP under part D of the Act Source Compliance revision for major stationary sources schedule because the State is relying on these operating in the D/FW ozone NOX control measures to demonstrate nonattainment area. The proposed Cement kilns in Ellis Coun- May 1, 2003. attainment of the 1-hour ozone standard ty. emission specifications, for the D/FW Cement kilns in Bexar, May 1, 2005. in the D/FW area. We are also proposing area, listed in Table V are more stringent Comal, Hays, McLennan approval of these rules under sections than those Reasonably Available Control Counties. 110 and 116 because they contribute to Technology (RACT) emission continued maintenance of the standard specifications found in Table VIII of this in the eastern half of the State of Texas The proposed emission specifications document. We published approval of and they strengthen the existing Texas meet and are in agreement with those the Texas NO RACT emission SIP. X found in our reference document EPA– specifications in 65 FR 53172 on 453/R–94–004 for cement plants. We are 4. What Does the April 30, 2000, SIP September 1, 2000. of the opinion that the above listed Revision for Major Stationary Sources compliance dates are as expeditious as in the D/FW Area Say? practicable compared with the compliance dates for similar sources in This rule revision requires reductions serious and severe ozone nonattainment in emissions of NOX from major
TABLE V.ÐAFFECTED SOURCES, EMISSION SPECIFICATIONS, AND LOCATIONS FOR MAJOR STATIONARY SOURCES IN THE D/FW OZONE NONATTAINMENT AREA
Source Emission specification Location
Gas fired boilers ≥40 MMBtu, non-utility boilers ...... 30 ppmv NOX at 3% O2 dry basis ...... D/FW Utility boilersÐpart of a large system in D/FW ...... 0.033 lb NOX/MMBtu ...... D/FW Utility boilersÐpart of a small system in D/FW ...... 0.06 lb NOX/MMBtu ...... D/FW Lean burn stationary engine ≥300 hp gas fired and gas/liquid-fired engines 2.0 g NOX/hp-hr ...... D/FW Lean burn stationary engine ≥300 hp gas fired and gas/liquid-fired engines 3.0 g CO/hp-hr ...... D/FW Boiler or process heater ≥40 MMBtu ...... 400 ppmv CO at 3% O2 dry basis ...... D/FW Boiler or process heater ≥40 MMBtu ...... 5 ppmv ammonia on a one-hour averaging basis D/FW
We are proposing to approve the Act on the basis that these rules will proposed rules under section 110 of the strengthen the SIP.
TABLE VI.ÐAFFECTED SOURCES AND THEIR COMPLIANCE SCHEDULES FOR UTILITY ELECTRIC GENERATION UNITS IN D/ FW OZONE NONATTAINMENT AREA
Source type Compliance date
RACT ...... No later than November 15, 1999. 2 ¤3 NOX emission reductions ...... No later than May 1, 2003. All NOX reductions ...... No later than May 1, 2005.
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TABLE VII.ÐAFFECTED SOURCES AND We are of the opinion that the above 5. What Are the EAxisting NOX THEIR COMPLIANCE SCHEDULES FOR listed compliance dates in the Tables VI Emissions Specifications in the Texas INDUSTRIAL, COMMERCIAL, AND IN- and VII are as expeditious as practicable SIP? STITUTIONAL COMBUSTION SOURCES compared with the compliance dates of similar sources in serious and severe The following table contains a IN D/FW OZONE NONATTAINMENT summary of the type of affected sources, AREA ozone nonattainment areas in the country. We are proposing approval of their corresponding emission limits, and relevant applicability information for Source type Compliance date the NOX emission specifications and compliance dates for the affected major NOX sources in the existing Texas SIP- RACT ...... No later than Novem- stationary sources in the D/FW area as approved rules. We have determined ber 15, 1999. a part of the Texas 1-hour ozone SIP that these emission specifications in the Lean burn engines .... No later than Novem- under part D of the Act because the existing Texas SIP-approved rules are ber 15, 2001. consistent with Federal guidelines, and 2 State is relying on the NOX control ¤3 NOX emission re- No later than May 1, we approved them as meeting the RACT ductions. 2003. measures to demonstrate attainment of requirements of the Act. See 65 FR All NOX reductions the 1-hour ozone standard in the D/FW No later than May nonattainment area. 53172, published on September 1, 2000. 1, 2005..
TABLE VIII.ÐSUMMARY OF THE TEXAS SIP-APPROVED RULES FOR SOURCES IN THE H/GA, B/PA, AND D/FW NONATTAINMENT AREAS
Source NOX limit Additional information
Utility Boilers ...... 0.26 lb/MMBtu ...... Natural gas or a combination of natural gas and waste oil, 24-hour rolling average. Utility Boilers ...... 0.20 lb/MMBtu ...... Natural gas or a combination of natural gas and waste oil, 30-day rolling average. Utility Boilers ...... 0.38 lb/MMBtu ...... Coal, tangentially-fired, 24-hour rolling average. Utility Boilers ...... 0.43 lb/MMBtu ...... Coal, wall-fired, 24-hour rolling average, Utility Boilers ...... 0.30 lb/MMBtu ...... Fuel oil only, 24-hour rolling average. Utility Boilers ...... [a(0.26) + b(0.30)]/(a + b) ...... Oil and gas mixture, 24-hour rolling average, where a=percent natural gas heat input b=percent fuel oil heat input. Stationary Gas Turbines ...... 42 parts per million volume dry @ 15% 02, natural gas, ≥30 Mega Watt (mW) annual electric output (ppmvd) basis. ≥2500 hour × mW rating. Stationary Gas Turbines ...... 65 parts per million volume dry @ 15% O2, fuel oil. (ppmvd). Stationary Gas Turbines ...... 0.20 lb/MMBtu ...... Natural gas, peaking units, annual electric output <2500 hour × mW rating. Stationary Gas Turbines ...... 0.30 lb/MMBtu ...... Fuel oil, peaking units, annual electric output <2500 hour × mW rat- ing. Non-utility Boilers ...... 0.10 lb/MMBtu ...... Natural gas, low heat release and T<200 °F, capacity≥100 MMBtu/hr. Non-utility Boilers ...... 0.15 lb/MMBtu ...... Natural gas, low heat release, preheated air 200≤T< 400 °F, capac- ity≥100 MMBtu/hr. Non-utility Boilers ...... 0.20 lb/MMBtu ...... Natural gas, low heat release, preheated air T≥400 °F, capacity≥100 MMBtu/hr. Non-utility Boilers ...... 0.20 lb/MMBtu ...... Natural gas, high heat release, without air or preheated air T<250 °F, capacity≥100 MMBtu/hr. Non-utility Boilers ...... 0.24 lb/MMBtu ...... Natural gas, high heat release, preheated air 250≤T<500 °F, capac- ity≥100 MMBtu/hr. Non-utility Boilers ...... 0.28 lb/MMBtu ...... Natural gas, high heat release, preheated air T≥500 °F, capacity≥100 MMBtu/hr. Process Heaters ...... 0.10 lb/MMBtu ...... Natural gas, preheated air T<200 °F, capacity≥100 MMBtu/hr. Process Heaters ...... 0.13 lb/MMBtu ...... Natural gas, preheated air 200≤T<400 °F, capacity≥100 MMBtu/hr. Process Heaters ...... 0.18 lb/MMBtu ...... Natural gas, low heat release, preheated air T≥400 °F, capacity≥100 MMBtu/hr. Process Heaters ...... 0.10 lb/MMBtu ...... Natural gas, firebox T<1400 °F, capacity≥100 MMBtu/hr. Process Heaters ...... 0.125 lb/MMBtu ...... Natural gas, firebox 1400≤T<1800 °F, capacity≥100 MMBtu/hr. Process Heaters ...... 0.15 lb/MMBtu ...... Natural gas, firebox T≥1800 °F, capacity≥100 MMBtu/hr. Process Heaters Non-utility and 0.30 lb/MMBtu ...... Liquid fuel, capacity≥100 MMBtu/hr. Boilers. Process Heaters and Non-utility 0.30 lb/MMBtu ...... Wood fuel, capacity≥100 MMBtu/hr. Boilers. Stationary Gas Turbines ...... 42 parts per million volume dry @ 15% O2, rating≥10 mW. (ppmvd) basis. Reciprocating Internal Combustion 2.0 gram/hp-hr ...... Natural gas, rich burn, stationary, capacity≥150 hp in H/GA, capacity Engines. ≥300 hp in B/PA. Absorbers of Adipic Acid Production 2.5 lb/ton of acid produced ...... 24-hr rolling average. Units. Absorbers of Nitric Acid Production 2.0 lb/ton of acid produced ...... 24-hr rolling average. Units.
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TABLE VIII.ÐSUMMARY OF THE TEXAS SIP-APPROVED RULES FOR SOURCES IN THE H/GA, B/PA, AND D/FW NONATTAINMENT AREASÐContinued
Source NOX limit Additional information
Reciprocating Internal Combustion 3.0 gram/hp-hr ...... Natural gas, lean burn, stationary, capacity≥150 hp in H/GA, capac- Engines. ity≥300 hp in B/PA or D/FW. Also includes a 3.0 gram/hp-hr limit for CO.
6. What Are NOX? the major source size for D/FW is 50 tpy a formal adoption by a State-authorized or more, when uncontrolled. rulemaking body. Nitrogen oxides belong to the group of According to section 182(d) of the Once a State adopts a rule, regulation, criteria air pollutants. The NOX result Act, a major source in a severe or control strategy, the State may submit from burning fuels, including gasoline nonattainment area is a source that the adopted provisions to us and request and coal. Nitrogen oxides react with emits, when uncontrolled, 25 tpy or that we include these provisions in the volatile organic compounds (VOC) to more of NOX. The H/GA area is a severe federally enforceable SIP. We must then form ozone or smog, and are also major ozone nonattainment area, so the major decide on an appropriate Federal action, components of acid rain. source size for the H/GA area is 25 tpy provide public notice on this action, 7. What Is a Nonattainment Area? or more, when uncontrolled. and seek additional public comment 9. What Is a State Implementation regarding this action. If we receive A nonattainment area is a geographic Plan? adverse comments, we must address area in which the level of a criteria air them prior to a final action. Section 110 of the Act requires States pollutant is higher than the level Under section 110 of the Act, when to develop air pollution regulations and allowed by Federal standards. A single we approve all State regulations and control strategies to ensure that State air geographic area may have acceptable supporting information, those State quality meets the NAAQS that EPA has levels of one criteria air pollutant but regulations and supporting information unacceptable levels of one or more other established. Under section 109 of the Act, EPA established the NAAQS to become a part of the federally approved criteria air pollutants; thus, a geographic SIP. You can find records of these SIP area can be attainment for one criteria protect public health. The NAAQS address six criteria pollutants. These actions in the Code of Federal pollutant and nonattainment for another Regulations at Title 40, part 52, entitled criteria pollutant at the same time. criteria pollutants are: Carbon monoxide, nitrogen dioxide, ‘‘Approval and Promulgation of 8. What Are Definitions of Major ozone, lead, particulate matter, and Implementation Plans.’’ The actual State Sources for NOX? sulfur dioxide. regulations that we approved are not Each State must submit these reproduced in their entirety in the CFR Section 302 of the Act generally regulations and control strategies to us but are ‘‘incorporated by reference,’’ defines ‘‘major stationary source’’ as a for approval and incorporation into the which means that we have approved a facility or source of air pollution which federally enforceable SIP. Each State has given State regulation with a specific emits, when uncontrolled, 100 tons per a SIP designed to protect air quality. effective date. year (tpy) or more of air pollution. This These SIPs can be extensive, containing general definition applies unless 11. What Does Federal Approval of a State regulations or other enforceable SIP Mean to Me? another specific provision of the Act documents and supporting information explicitly defines major source such as emission inventories, A State may enforce State regulations differently. Therefore, for NOX, a major monitoring networks, and modeling before and after we incorporate those source is one which emits, when demonstrations. regulations into a federally approved uncontrolled, 100 tpy or more of NOX in SIP. After we incorporate those marginal and moderate areas. The B/PA 10. What Is the Federal Approval regulations into a federally approved area is a moderate ozone nonattainment Process for a SIP? SIP, both EPA and the public may also area, so the major source size for the B/ When a State wants to incorporate its take enforcement action against PA area is 100 tpy or more, when regulations into the federally violators of these regulations. uncontrolled. According to section enforceable SIP, the State must formally 12. What Areas in Texas Will This 182(c) of the Act, a major source in a adopt the regulations and control Action Affect? serious nonattainment area is a source strategies consistent with State and that emits, when uncontrolled, 50 tpy or Federal requirements. This process The following table contains list of more of NOX. The D/FW area is a includes a public notice, a public affected counties and the rules revision serious ozone nonattainment area, so hearing, a public comment period, and we are proposing to approve.
TABLE IX.ÐRULES LOG NUMBER, RULES REVISION, AND AFFECTED AREAS FOR TEXAS NOX SIP
Rule log No. Rule revision Affected areas
1999±046±117±AI ...... Electric generating facilities (East Atascosa, Bastrop, Bexar, Brazos, Brazoria, Chambers, Cherokee, and Central Texas). Calhoun, Collin, Dallas, Denton, Fannin, Fayette, Fort Bend, Free- stone, Galveston, Goliad, Gregg, Grimes, Hardin, Harris, Harrison, Henderson, Hood, Hunt, Jefferson, Lamar, Liberty, Limestone, Marion, McLennan, Milam, Montgomery, Morris, Nueces, Orange, Parker, Red River, Robertson, Rusk, Tarrant, Titus, Travis, Vic- toria, Waller, and Wharton counties. 1999±049±117±AI ...... Cement kilns ...... Bexar, Comal, Ellis, Hays, and McLennan counties.
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TABLE IX.ÐRULES LOG NUMBER, RULES REVISION, AND AFFECTED AREAS FOR TEXAS NOX SIPÐContinued
Rule log No. Rule revision Affected areas
1999±055D±117±AI ...... Point sources in D/FW area ...... Collin, Dallas, Denton, and Tarrant counties.
If you are in one of these Texas to disapprove a SIP submission for DEPARTMENT OF HEALTH AND counties, you should refer to the Texas failure to use VCS. HUMAN SERVICES NOX rules to determine if and how It would thus be inconsistent with Health Care Financing Administration today’s action will affect you. applicable law for EPA, when it reviews Administrative Requirements a SIP submission, to use VCS in place 42 CFR Part 435 of a SIP submission that otherwise Under Executive Order 12866 (58 FR satisfies the provisions of the Clean Air [HCFA±2086±P] 51735, October 4, 1993), this proposed action is not a ‘‘significant regulatory Act. Thus, the requirements of section RIN 0938±AK22 action’’ and therefore is not subject to 12(d) of the National Technology review by the Office of Management and Transfer and Advancement Act of 1995 Medicaid Program; Change in Budget. This proposed action merely (15 U.S.C. 272 note) do not apply. Application of Federal Financial Participation Limits approves State law as meeting federal The proposed rule does not involve requirements and imposes no additional special consideration of environmental AGENCY: Health Care Financing requirements beyond those imposed by justice related issues as required by Administration (HCFA), HHS. State law. Accordingly, the Executive Order 12898 (59 FR 7629, ACTION: Proposed rule. Administrator certifies that this February 16, 1994). proposed rule will not have a significant SUMMARY: This proposed rule would As required by section 3 of Executive economic impact on a substantial change the current requirement that Order 12988 (61 FR 4729, February 7, number of small entities under the limits on Federal Financial Participation Regulatory Flexibility Act (5 U.S.C. 601 1996), in issuing this proposed rule, (FFP) must be applied before States use et seq.). EPA has taken the necessary steps to less restrictive income methodologies Because this rule proposes to approve eliminate drafting errors and ambiguity, than those used by related cash pre-existing requirements under State minimize potential litigation, and assistance programs in determining law and does not impose any additional provide a clear legal standard for eligibility for Medicaid. enforceable duty beyond that required affected conduct. This regulatory change is necessary by State law, it does not contain any The EPA has complied with Executive because the current regulatory unfunded mandate or significantly or Order 12630 (53 FR 8859, March 15, interpretation of how the FFP limits uniquely affect small governments, as 1988) by examining the takings apply to income methodologies under described in the Unfunded Mandates implications of the rule in accordance section 1902 (r)(2) of the Social Security Reform Act of 1995 (Public Law 104–4). with the ‘‘Attorney General’s Act (the Act) unnecessarily restricts For the same reason, this proposed rule Supplemental Guidelines for the States’ ability to take advantage of the also does not significantly or uniquely Evaluation of Risk and Avoidance of authority to use less restrictive income affect the communities of tribal Unanticipated Takings’’ issued under methodologies under that section of the statute. While the enactment of section governments, as specified by Executive the executive order. This proposed rule 1902(r)(2) of the Act could be read in Order 13084 (63 FR 27655, May 10, does not impose an information the limited manner embodied in current 1998). collection burden under the provisions regulations the statute does not require This proposed rule will not have of the Paperwork Reduction Act of 1995 substantial direct effects on the States, such a reading, and subsequent State (44 U.S.C. 3501 et seq.). on the relationship between the national experience with implementing section government and the States, or on the List of Subjects in 40 CFR Part 52 1902(r)(2) calls into question the current distribution of power and regulation’s approach. responsibilities among the various Environmental protection, Air DATES: We will consider comments if levels of government, as specified in pollution control, Carbon monoxide, we receive them at the appropriate Executive Order 13132 (64 FR 43255, Hydrocarbons, Nitrogen dioxide, address, as provided below, no later August 10, 1999), because it merely Nitrogen oxides, Nonattainment, Ozone, than 5 p.m. on November 30, 2000. approves a State rule implementing a Reporting and recordkeeping ADDRESSES: Mail written comments (1 federal standard, and does not alter the requirements, Volatile organic original and 3 copies) to the following relationship or the distribution of power compounds. address: Health Care Financing and responsibilities established in the Authority: 42 U.S.C. 7401 et seq. Administration, Department of Health Clean Air Act. This proposed rule also and Human Services, Attention: HCFA– is not subject to Executive Order 13045 Dated: October 16, 2000. 2086–P, P.O. Box 8010, Baltimore, MD (62 FR 19885, April 23, 1997), because Gregg A. Cooke, 21244–8010. it is not economically significant. Regional Administrator, Region 6. To ensure that mailed comments are In reviewing SIP submissions, EPA’s [FR Doc. 00–27925 Filed 10–30–00; 8:45 am] received in time for us to consider them, role is to approve State choices, BILLING CODE 6560±50±P please allow for possible delays in provided that they meet the criteria of delivering them. the Clean Air Act. In this context, in the If you prefer, you may deliver your absence of a prior existing requirement written comments (1 original and 3 for the State to use voluntary consensus copies) to one of the following standards (VCS), EPA has no authority addresses:
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Room 443-G, Hubert H. Humphrey I. Background under section 1902(f) of the Act, to Building, 200 Independence Avenue, Section 2373(c) of the Deficit apply more restrictive eligibility criteria SW., Washington, DC 20201, or Reduction Act of 1984 (DRA) than are used by the Supplemental Room C5–16–03, 7500 Security established a moratorium period Security Income (SSI) program. This Boulevard, Baltimore, MD 21244– beginning on October 1, 1981, during provision of the Medicare Catastrophic 8010. which the Secretary was prohibited Coverage Act was effective for medical Comments mailed to the above from taking any compliance, assistance furnished on or after October addresses may be delayed and received disallowance, penalty, or other 1, 1982. This authority was codified in too late for us to consider them. regulatory action against a State because a new section 1902(r)(2) of the Act. The application of FFP limits prior to Because of staff and resource a State’s Medicaid plan included a standard or methodology for use of section 1902(r)(2) more liberal limitations, we cannot accept comments income methodologies was based on the by facsimile (FAX) transmission. In determining financial eligibility for the medically needy that the Secretary Senate Report accompanying the 1987 commenting, please refer to file code amendment to the DRA moratorium HCFA–2086–P. determined was less restrictive than the standard or methodology required under (Senate Report No. 109, 100th Congress, Comments received timely will be 1st session at 24–25) which stated that: available for public inspection as they the related cash assistance program. are received, generally beginning The provisions of the DRA The moratorium does not eliminate the limits on income and resources of eligible approximately 3 weeks after publication moratorium were clarified by section 9 of the Medicare and Medicaid Patient individuals and families under section of a document, in Room 443–G of the 1903(f) (including the requirements that the Department’s office at 200 Program Protection Act of 1987. Section applicable medically needy income level not Independence Avenue, SW., 9 amended section 2373(c) of DRA to exceed the amount determined in accordance Washington, DC, on Monday through specify that the moratorium applied to with standards prescribed by the Secretary to Friday of each week from 8:30 to 5 p.m. the Secretary’s compliance, be equivalent to 1331⁄3 percent of the most (phone: (202) 690–7890). disallowance, penalty, or other generous AFDC eligibility standard, and that regulatory actions against a State the income of individuals receiving a State FOR FURTHER INFORMATION CONTACT: Roy because the State plan is determined to supplementary payment in a medical Trudel, (410) 786–3417. be in violation of provisions of the Act institution or receiving home and community-based services under a special SUPPLEMENTARY INFORMATION: Generally, for coverage, as optional categorically in determining financial eligibility of income standard not exceed 300% of the SSI needy, of certain aged, blind, and standard). The moratorium also does not individuals for the Medicaid program, disabled individuals who were in permit States Medicaid benefits to those who State agencies must apply the financial institutions or receiving home and are not ‘‘categorically related’’ individuals methodologies and requirements of the community-based services, as well as (that is, individuals who would not be cash assistance program that is most methodologies for determining financial eligible for Medicaid, regardless of the closely categorically related to the eligibility of the medically needy. amount of their income and resources). individual’s status. Our regulations at The moratorium applied to an Since, as the legislative history 42 CFR 435.601 set forth the amendment or other changes in indicates, section 1902(r)(2) is requirements for State agencies applying Medicaid State plans, or operation or essentially the codification of the DRA less restrictive income and resource program manuals, regardless of whether moratorium, we continued to apply the methodologies when determining the Secretary had approved, FFP limits at section 1903(f) of the Act Medicaid eligibility under the authority disapproved, acted upon, or not acted when developing the implementing of section 1902(r)(2) of the Social upon the amendment or other change, regulations for section 1902(r)(2). Security Act (the Act). Current or operation or program manual. However, subsequent experience has regulations at 42 CFR 435.1007 provide Authority to adopt less restrictive shown that the policy we adopted that when States use less restrictive financial methodologies as part of a restricted the flexibility Congress income and resource methodologies State’s Medicaid plan was added to the intended States to have when it enacted under section 1902(r)(2), the limits on law in 1988. Section 303(e) of the section 1902(r)(2) in ways we did not Federal Financial Participation (FFP) in Medicare Catastrophic Coverage Act of foresee when we published the current section 1903(f) of the Act apply before 1988, enacted on July 1, 1988 (and regulations. The real effect of the policy application of any less restrictive amended by section 608(d)(16)(C) of the we adopted was to make it almost income methodologies. We are Family Support Act of 1988), amended impossible for States to actually use less proposing to amend that regulation to the Act to permit States to use less restrictive income methodologies for change this requirement so that FFP restrictive financial methodologies in many eligibility groups, including the limits would apply after application of determining eligibility not only for the medically needy, because use of such any less restrictive income medically needy eligibility group at methodologies would violate the FFP methodologies under section 1902(r)(2) section 1902(a)(10)(C) of the Act, but limits. States have noted that the of the Act. also for specified categorically needy application of the FFP limits prior to The adoption of this policy would groups of individuals. These use of less restrictive income give States additional flexibility in categorically needy groups include methodologies unnecessarily limits setting Medicaid eligibility qualified pregnant women and children their flexibility to expand Medicaid requirements. Also, we believe adoption (section 1902(a)(10)(A)(i)(III) of the Act), eligibility and simplify program of this policy reflects the intent of poverty level pregnant women and administration by modifying cash Congress to move the Medicaid program infants (section 1902(a)(10)(A)(i)(IV) of assistance financial methodologies that away from cash assistance program the Act), qualified Medicare do not work well in the Medicaid rules, as evidenced by enactment of the beneficiaries (section 1905(p) of the context. Personal Responsibility and Work Act), all of the optional categorically Further, the passage of Pub. L. 104– Opportunity Reconciliation Act of 1996, needy groups specified in section 193, the Personal Responsibility and which severed the link between the 1902(a)(10)(A)(ii) of the Act, and Work Opportunity Reconciliation Act of AFDC program and Medicaid. individuals in States that have elected, 1996, leads us to believe that the current
VerDate 112000 15:43 Oct 30, 2000 Jkt 194001 PO 00000 Frm 00023 Fmt 4702 Sfmt 4702 E:\FR\FM\31OCP1.SGM pfrm11 PsN: 31OCP1 Federal Register / Vol. 65, No. 211 / Tuesday, October 31, 2000 / Proposed Rules 64921 application of the FFP income limits disregards in the State plan authorized analysis (RIA) must be prepared for under section 1902(r)(2) no longer under section 1902(r)(2)’. major rules with economically reflects Congressional intent. In We are proposing to further amend significant effects ($100 million or more enacting this legislation, Congress § 435.1007 by adding a new paragraph in any one year). This rule is considered clearly expressed its intent that States (f) to read: ‘‘A State may use the less to be a major rule with economically should have the flexibility to depart restrictive income methodologies significant effects. from cash assistance program-based included under its State plan as The Medicaid and Medicare cost of income criteria to define Medicaid authorized under § 435.601 in the proposed rule is projected to be eligibility. Given that Congress chose to determining whether a family’s income $960 million over five years. This sever the link between cash assistance exceeds the limitation described in estimate is based on available cost data and Medicaid under this legislation, we paragraph (b) of this section.’’ on medically needy income standards believe it is valid to conclude that and medically needy spending levels. III. Collection of Information Congress did not actually intend that Such data could be obtained for only Requirements FFP limits, which are based on cash two States (Utah and California). Using assistance standards, apply prior to use Under the Paper Work Reduction Act that available data, we projected the of less restrictive financial (PRA) of 1995, we are required to potential cost of the proposed rule by methodologies under section 1902(r)(2) provide 60-day notice in the Federal assuming that within two years of of the Act for those eligibility groups to Register and solicit public comment if enactment about one fourth of States which section 1902(r)(2) applies. Office of Management and Budget (i.e., States representing at least 25% of Also, section 1903(f) was enacted review and approval is needed because total Medicaid program costs) would prior to section 1902(r)(2). Had Congress a proposed regulation imposes a implement changes similar to those intended that the FFP limits apply prior collection of information requirement. proposed by Utah and California. The to use of less restrictive income However, this proposed regulation result was an estimated potential cost of methodologies, it could have amended does not impose any new collection of $860 million over five years in Medicaid section 1903(f) to so state. The fact that information requirements. Whether to costs and about $100 million in section 1903(f) was not so amended take advantage of the flexibility the Medicare costs as explained below. Arriving at the Medicaid and indicates that Congress intended that proposed rule makes available is strictly Medicare costs was difficult due to the the FFP limits apply after, not before, at the option of each State. If a State fact that implementation of the option use of less restrictive income chooses to use any less restrictive under this rule is entirely at the methodologies. income methodologies under the proposed rule, it would do so by using discretion of the State. Further, States Thus, this change will give States that choose to exercise the option have needed additional flexibility in setting the existing process for amending its State Medicaid plan. The proposed rule great latitude in establishing the extent Medicaid eligibility requirements. Even to which, and the eligibility groups for though section 1902(r)(2) was derived imposes no new or different processes or information requirements on States. which, the option would be applied from the DRA moratorium, its own under their State Medicaid plan. As a legislative history did not contain any IV. Response to Comments result of limited data being available, we similar discussion of its interaction with invite comments on this section. the 1903(f) FFP limits. As such, we do Because of the large number of items not believe it is necessary to consider of correspondence we normally receive Benefits of the Proposed Rule Change on Federal Register documents the legislative history of DRA to be We believe the proposed change will determinative of Congressional published for comment, we are not able to acknowledge or respond to them benefit both States and individuals in a understanding of the operation of number of ways. For example, under section 1902(r)(2). individually. We will consider all comments we receive by the date and normal eligibility rules, States are II. Provisions of the Proposed time specified in the DATES section of required to count many kinds of Regulations this preamble, and, if we proceed with income. Some of these types of income a subsequent document, we will are administratively burdensome to deal As explained above, we are proposing with, and often do not materially affect to amend § 435.1007 to change the respond to the major comments in the preamble to that document. the outcome of the eligibility requirement that FFP limits apply prior determination. Some examples are the to use of any less restrictive income V. Regulatory Impact Statement value of food or shelter provided to an methodologies under section 1902(r)(2) A. Overall Impact applicant (called in-kind support and of the Act. maintenance), income belonging to a Section 435.1007 Categorically Needy, We and the Office of Management and parent of a child, or a spouse who is not Medically Needy, and Qualified Budget have examined the impacts of applying for benefits (called deemed Medicare Beneficiaries this rule as required by Executive Order income), and low amounts of income 12866 (September 1993, Regulatory such as interest earned on savings In 435.1007(b), we intend to delete Planning and Review) and the accounts. The proposed rule would the phrase ‘‘does not exceed’’ and Regulatory Flexibility Act (RFA) allow States to use income disregards to replace it with the word ‘‘exceeds’’. This (September 19, 1980, Pub. L. 96–354). simplify the process of determining is purely an editorial change to correct Executive Order 12866 directs agencies eligibility by not counting types of an error in wording in the current to assess all costs and benefits of income that primarily impose an regulation. available regulatory alternatives and, if administrative burden. In § 435.1007, we are proposing to regulation is necessary, to select amend paragraph (e) by removing the regulatory approaches that maximize Medically Needy Income Limits phrase ‘‘are applied and before the less net benefits (including potential Under a medically needy program, restrictive income deductions under economic, environmental, public health States can choose to cover under § 435.601(c)’’ and replacing it with the and safety effects, distributive impacts, Medicaid individuals with income that following language: ‘‘and any income and equity). A regulatory impact is too high to otherwise be eligible, but
VerDate 112000 15:43 Oct 30, 2000 Jkt 194001 PO 00000 Frm 00024 Fmt 4702 Sfmt 4702 E:\FR\FM\31OCP1.SGM pfrm11 PsN: 31OCP1 64922 Federal Register / Vol. 65, No. 211 / Tuesday, October 31, 2000 / Proposed Rules who, by subtracting incurred medical medically needy income standard is Medicaid eligibility rolls by expenses from their income, could very low in many States. A person who disregarding additional types and reduce their income to the State’s was eligible under the institutional amounts of income and resources, medically needy income standard. This group may find that he or she must thereby allowing people who could not process is known as spending down spend most of his or her income on otherwise meet the program’s eligibility excess income, or ‘‘spenddown’’. medical care in the community before requirements to become eligible. However, in many States the the medically needy income standard However, the current application of the medically needy income standard is can be met. The person may not be able FFP limits to the use of less restrictive very low; in at least 22 States, the to incur enough in the way of medical income disregards greatly reduces the medically needy income standard is expenses while in the community to options States have to implement that actually lower than the income standard meet the medically needy income kind of program expansion. The for SSI benefits ($512 a month for an standard, which in turn would mean the proposed regulation change would give individual in 2000). In four States, the person effectively would be without any States the full flexibility provided by medically needy income standard is less coverage for medical care. Even if the section 1902(r)(2) to expand their base than $200 a month. This creates a person could incur enough medical of eligible individuals if they choose to situation where individuals whose expenses, though, the medical expenses do so. income is just slightly over the limit that would consume so much income that Effect on Small Businesses and Small would allow them to receive Medicaid the person would have little left to use Rural Hospitals as SSI recipients must spend down a for the basic necessities of life such as certain amount of ‘‘excess’’ income to food, clothing, shelter, transportation, The RFA requires agencies to analyze reach the medically needy income level. etc. options for regulatory relief of small For example, a person with $512 a The practical effect of this is that businesses. For purposes of the RFA, month in income can be eligible for SSI many people in institutions who would small entities include small businesses, and get free Medicaid in most States. A like to move to the community, and who nonprofit organizations, and person with just $1 more cannot be would normally be able to manage in a government agencies. Most hospitals eligible for SSI, and thus cannot receive community setting, remain in the and most other providers and suppliers Medicaid based on receiving SSI institution because they literally cannot are small entities, either by nonprofit benefits. Depending on a particular afford to leave. The proposed change in status or by having revenues of $5 State’s medically needy income level, the regulations would give States million or less annually. Individuals such an individual may have to spend opportunities to correct spenddown and States are not included in the over $300 on medical care each month problems so that more people could definition of a small entity. just to reach a medically needy income leave institutional settings and live in We certify that small entities would limit that is that far below the SSI level. the community. not be affected by the proposed rule Under the Medicaid statute, States because the rule only affects States, cannot just increase their medically Encouraging Work Effort which by definition are not small needy income levels to deal with this While legislation enacted in the last entities. The proposed rule would affect problem. However, under the proposed few years has given States new options only States because any decisions rule, a State could use section 1902(r)(2) for providing Medicaid to individuals concerning whether to take advantage of to disregard additional amounts of with disabilities who want to work, the options the rule makes available income under its medically needy States may want to encourage work would be made at the State government program, effectively reducing or even effort among individuals eligible under level and then implemented by each eliminating the large spenddown other groups such as the medically State. However, because of limited data liability described in the example above. needy, or among individuals who may available, we invite comments in this not readily fit into one of the new work area. Helping People Move From Institutions incentives groups. One way to In addition, section 1102(b) of the Act to the Community encourage work effort is to allow people requires us to prepare a regulatory The medically needy spenddown to keep more of the income they earn impact analysis if a rule may have a problem described above can also have without forcing them to either spend significant impact on the operations of adverse effects for people in medical more for medical care under a medically a substantial number of small rural institutions who would like to receive needy spenddown, or risk losing hospitals. This analysis must conform to care in community settings. In many Medicaid altogether. the provisions of section 603 of the States, people with relatively high levels Under section 1902(r)(2) a State could RFA. For purposes of section 1102(b) of of income (up to $1,536 a month in do that by increasing the amount of the Act, we define a small rural hospital 2000) can still be eligible for Medicaid earned income that is not counted in as a hospital that is located outside of provided they are in a medical determining a person’s eligibility. a Metropolitan Statistical Area and has institution. This is because many States However, the current application of the fewer than 50 beds. cover an eligibility group that is FFP limits to the use of less restrictive This proposed rule would have no specifically targeted at people in income disregards effectively precludes direct impact on small rural hospitals. institutions, and which provides for that States from offering that kind of The proposed rule affects only States high income standard. encouragement for many eligibility because only States can implement the As long as a person is in the groups. The proposed change in the option the proposed rule makes institution, he or she remains eligible regulations would remove that available. As such small rural hospitals for Medicaid. However, if the person restriction, giving States another way to are in no way involved in the process wants to move to the community, he or encourage work effort. of deciding whether to take advantage of she will lose eligibility under the the flexibility the proposed rule offers. institutional group. The only alternative Medicaid Eligibility Expansion Small rural hospitals would be in many cases is to become eligible in In addition to the specific examples impacted only to the extent that a the community as medically needy. described above, section 1902(r)(2) gives State’s use of less restrictive income However, as explained previously, the States the option of expanding their methodologies could result in some
VerDate 112000 15:43 Oct 30, 2000 Jkt 194001 PO 00000 Frm 00025 Fmt 4702 Sfmt 4702 E:\FR\FM\31OCP1.SGM pfrm11 PsN: 31OCP1 Federal Register / Vol. 65, No. 211 / Tuesday, October 31, 2000 / Proposed Rules 64923 increase in the number of individuals Medicaid who receive inpatient hospital for Medicaid who otherwise could not eligible for Medicaid. This in turn could services, it would affect the calculation be eligible under the current result in a slight increase in utilization of hospitals’ disproportionate share regulations. of rural hospital services should an hospital (DSH) calculations under the Because this rule is considered major individual eligible under the less Medicare program. We estimate that rule that is economically significant, we restrictive methodology need such Medicare DSH payments would increase have prepared a regulatory impact services. Again, because of limited data by $100 million over five years due to statement. We believe that this rule will available, we invite comments in this changes in this rule. have an estimated cost of $960 million area. Under Medicaid, it is projected that dollars over five years based on best Section 202 of the Unfunded the Federal cost of this rule could be as available data. In addition, we certify, Mandates Reform Act of 1995 also much as $860 million over 5 years. that this rule would not have a requires that agencies assess anticipated However, because actual significant economic impact on a costs and benefits before issuing any implementation of the provisions of the substantial number of small entities or rule that may result in an annual rule is strictly at the option of each a significant impact on the operations of expenditure by State, local, or tribal State, actual Federal program costs a substantial number of small rural governments, in the aggregate, or by the would depend on whether, and to what hospitals. private sector, of $100 million. The degree, States choose to take advantage In accordance with the provisions of proposed rule would have no impact on of the flexibility provided by the Executive Order 12866, this regulation the private sector. The rule would proposed rule. was reviewed by the Office of impose no requirements on State, local C. Alternatives Considered Management and Budget. or tribal governments. Rather, it would List of Subjects in 42 CFR Part 435 offer State governments additional There are few alternatives to the flexibility in operating their Medicaid proposed rule to consider. One Aid to Families with Dependent programs, but would not require that alternative is to maintain the Children, Grant programs—health, they make any changes in their requirement that the FFP limits apply Medicaid, Reporting and recordkeeping programs. prior to use of less restrictive income requirements, Supplemental Security methodologies under § 435.601, but Income (SSI), Wages. Federalism allow additional disregards at a For the reasons set forth in the Executive Order 13132 establishes somewhat higher level than is possible preamble, 42 CFR part 435 would be certain requirements that an agency under the current regulations. However, amended as set forth below: must meet when it promulgates a this would not provide States the level proposed rule (and subsequent final of flexibility to operate their Medicaid PART 435ÐELIGIBILITY IN THE rule) that would impose substantial programs that is provided under the STATES, DISTRICT OF COLUMBIA, direct requirement costs on State and proposed rule, and thus would be of THE NORTHERN MARIANA ISLANDS, local governments, preempts State law, only limited value. We rejected this AND AMERICAN SAMOA or otherwise has Federalism alternative because it would not give 1. The authority citation for part 435 implications. The proposed rule would States what they need to effectively continues to read as follows: impose no requirement costs on operate their Medicaid programs. We also considered pursuing a Authority: Sec. 1102 of the Social Security governments, nor does it preempt State Act (42 U.S.C. 1302). law or otherwise have Federalism legislative option that would have implications. changed the Medicaid statute itself to 2. Section 435.1007 is amended by HCFA has had discussions of this clarify that the FFP limits at section revising paragraphs (b) and (e) and issue with a number of State 1903(f) of the Act should apply after, adding paragraph (f) to read as follows: governments since approximately 1990. rather than before, the use of any less restrictive income methodologies under 435.1007 Categorically needy, medically Those discussions have taken place both needy, and qualified Medicare beneficiaries. with individual States and with groups section 1902(r)(2) of the Act. However, as explained previously the current * * * * * of States, including HCFA’s Medicaid (b) Except as provided in paragraphs Eligibility Technical Advisory Group policy concerning application of the FFP limits to less restrictive income (c) and (d) of this section, FFP is not and the National Association of State available in State expenditures for Medicaid Directors Executive Council. methodologies does not reflect a clear statutory requirement, but rather is an individuals (including the medically Based on the many discussions we have needy) whose annual income after had, we believe States will be administrative interpretation of the statute. Since the statute as written will deductions specified in §§ 435.831(a) overwhelmingly in favor of the and (c) exceeds the following amounts, proposed change. support the proposed change in policy, we believe the issue should be rounded to the next higher multiple of B. Anticipated Effects addressed via a change in the $100. 1. Effects on State Governments regulations rather than a change in the * * * * * The proposed rule will give States statute. Also, we believe the proposed (e) FFP is not available in greater flexibility in designing and rule is the most efficient and expedient expenditures for services provided to operating their Medicaid programs. way of accomplishing the desired categorically needy and medically 2. Effects on Providers change. needy recipients subject to the FFP No providers would be affected by limits if their annual income, after the this rule. D. Conclusion cash assistance income deductions and 3. Effects on the Medicare and We expect this rule to benefit State any income disregards in the State plan Medicaid programs Medicaid programs and Medicaid authorized under section 1902(r)(2) of This rule would increase Medicare beneficiaries by giving States additional the Act are applied, exceeds the 1331⁄3 costs by about $100 million over five flexibility in designing and operating percent limitation described under years. Since the rule may increase the their programs. In turn, this would paragraphs (b), (c), and (d) of this number of individuals eligible for allow States to make individuals eligible section.
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(f) A State may use the less restrictive to Taylor in compliance with the PART 73ÐRADIO BROADCAST income methodologies included under Commission’s minimum distance SERVICES its State plan as authorized under separation requirements, with respect to § 435.601 in determining whether a domestic allotments, without the 1. The authority Citation for part 73 family’s income exceeds the limitation imposition of a site restriction at continues to read as follows: described in paragraph (b) of this coordinates 34–27–54 NL and 110–05– Authority: 47 U.S.C 154, 303, 334 and 336. section. 26 WL. Petitioner is requested to provide further information concerning § 73.202 [Amended] (Catalog of Federal Domestic Assistance 2. Section 73.202(b), the Table of FM Program No. 93.778, Medical Assistance the community status of each proposed Program) community. Allotments under Arizona, is amended by adding Heber, Channel 288C2, Dated: July 25, 2000. DATES: Comments must be filed on or Snowflake, Channel 258C2, Overgaard, Nancy-Ann Min DeParle, before December 1, 2000, and reply Channel 232C3, and Taylor, Channel Administrator, Health Care Financing comments on or before December 18, 278C3. Administration. 2000. Approved: September 23, 2000. Federal Communications Commission. ADDRESSES: Donna E. Shalala, Federal Communications John A. Karousos, Commission, 445 12th Street, S.W., Secretary. Chief, Allocations Branch, Policy and Rules Room TW–A325, Washington, D.C. Division, Mass Media Bureau. [FR Doc. 00–27923 Filed 10–27–00; 8:45 am] 20554. In addition to filing comments [FR Doc. 00–27906 Filed 10–30–00; 8:45 am] BILLING CODE 4120±01±P with the FCC, interested parties should BILLING CODE 6712±01±P serve the petitioner, or its counsel or consultant, as follows: New Directions FEDERAL COMMUNICATIONS Media, Inc., Robert D. Zellmer, FEDERAL COMMUNICATIONS COMMISSION President, P.O. Box 1643, Greeley, CO COMMISSION 80632. 47 CFR Part 73 47 CFR Part 73 FOR FURTHER INFORMATION CONTACT: [DA 00±2302; MM Docket Nos. 00±189, 00± [DA 00±2301; MM Docket No. 00±194, RM± 190, 00±191, 00±192; RM±9984, RM±9985, Victoria M. McCauley, Mass Media Bureau, (202) 418–2180. 9972; MM Docket No. 00±195, RM±9973; MM RM±9986, RM±9987 Docket No. 00±196, RM±9974; MM Docket SUPPLEMENTARY INFORMATION: This is a No. 00±197, RM±9975] Radio Broadcasting Services (Heber, synopsis of the Commission’s Notice of Snowflake, Overgaard, and Taylor, Proposed Rule Making, Docket No. 00– Radio Broadcasting Services; Arizona) 189, 00–190, 00–191, 00–192, adopted Paradise, MI; Clinton TN; Lynchburg, TN; Rincon, TX AGENCY: Federal Communications September 27, 2000, and released Commission. October 11, 2000. The full text of this AGENCY: Federal Communications ACTION: Proposed rule. Commission decision is available for Commission. inspection and copying during normal ACTION: Proposed rule. SUMMARY: The Commission, at the business hours in the FCC Reference request of New Directions Media, Inc., Center (Room 239), 445 12th Street, SW, SUMMARY: This document proposes four seeks comment on four petitions for Washington, DC. The complete text of new allotments to Paradise, MI; rulemaking requesting the allotment of this decision may also be purchased Lynchburg, TN; Clinton, TN; and Channel 288C2 at Heber, Arizona; from the Commission’s copy contractor, Rincon, TX. The Commission requests Channel 258C2 at Snowflake, Arizona; International Transcription Services, comments on a petition filed by David Channel 232C3 at Overgaard, Arizona; Inc., (202) 857–3800, 1231 20th Street, C. Schaburg proposing the allotment of and Channel 278C3 at Taylor, Arizona NW, Washington, DC 20036. Channel 234A at Paradise, Michigan, as as each community’s first local aural Provisions of the Regulatory the community’s first local aural service. Channel 288C2 can be allotted Flexibility Act of 1980 do not apply to transmission service. Channel 234A can to Heber in compliance with the this proceeding. Members of the public be allotted to Paradise in compliance Commission’s minimum distance should note that from the time a Notice with the Commission’s minimum separation requirements, with respect to of Proposed Rule Making is issued until distance separation requirements at city domestic allotments, without the the matter is no longer subject to reference coordinates. The coordinates imposition of a site restriction, at Commission consideration or court for Channel 234A at Paradise are 46–37– coordinates 34–25–53 NL and 110–35– review, all ex parte contacts are 42 North Latitude and 85–02–18 West 36 WL. Channel 258C2 can be allotted prohibited in Commission proceedings, Longitude. Since Paradise is located to Snowflake in compliance with the such as this one, which involve channel within 320 kilometers (199 miles) of the Commission’s minimum distance allotments. See 47 CFR 1.1204(b) for U.S.-Canadian border, concurrence of separation requirements, with respect to rules governing permissible ex parte the Canadian government has been domestic allotments, without the contact. requested. See SUPPLEMENTARY imposition of a site restriction at For information regarding proper INFORMATION. coordinates 34–30–48 NL and 110–04– filing procedures for comments, see 47 DATES: Comments must be filed on or 40 WL. Channel 232C3 can be allotted CFR 1.415 and 1.420. to Overgaard in compliance with the before December 1, 2000, and reply Commission’s minimum distance List of Subjects in 47 CFR Part 73 comments on or before December 18, separation requirements, with respect to 2000. Radio broadcasting. domestic allotments, without the ADDRESSES: Federal Communications imposition of a site restriction at Part 73 of title 47 of the Code of Commission, Washington, DC 20554. In coordinates 34–23–27 NL and 110–33– Federal Regulations is amended as addition to filing comments with the 04 WL. Channel 278C3 can be allotted follows: FCC, interested parties should serve the
VerDate 112000 15:43 Oct 30, 2000 Jkt 194001 PO 00000 Frm 00027 Fmt 4702 Sfmt 4702 E:\FR\FM\31OCP1.SGM pfrm11 PsN: 31OCP1 Federal Register / Vol. 65, No. 211 / Tuesday, October 31, 2000 / Proposed Rules 64925 petitioner, his counsel, or consultant, as be allotted to Clinton in compliance Members of the public should note follows: with the Commission’s minimum that from the time a Notice of Proposed David C. Schaburg, 3105 S. MLK, #169, distance separation requirements with a Rule Making is issued until the matter Lansing, Michigan (Petitioner for the site restriction of 12.3 kilometers (7.7 is no longer subject to Commission Paradise, MI proposal); miles) west of city reference consideration or court review, all ex Clyde Scott, Jr., D.B.A. EME coordinates. The coordinates for parte contacts are prohibited in Communications, 293 JC Saunders Channel 291A at Clinton are 36–06–39 Commission proceedings, such as this Road, Moultrie, GA 31768 (Petitioner North Latitude and 84–15–54 West one, which involve channel allotments. for the Clinton, TN proposal); Longitude. See 47 CFR 1.1204(b) for rules Donald E. Martin, P.C., 6060 Hardwick The Commission requests comments governing permissible ex parte contacts. Place, Falls Church, Virginia 22041 on a petition filed by Mash Media For information regarding proper (Counsel for Mash Media); and proposing the allotment of Channel filing procedures for comments, see 47 Quevalle Communications, c/o Michael 296A at Lynchburg, Tennessee, as the CFR 1.415 and 1.420. Celenza, 41 Kathleen Crescent, Coran, community’s first local aural List of Subjects in 47 CFR Part 73 NY 11727 (Petitioner for the Rincon, transmission service. Channel 296A can TX proposal). be allotted to Lynchburg in compliance Radio broadcasting. FOR FURTHER INFORMATION CONTACT: R. with the Commission’s minimum Part 73 of title 47 of the Code of Barthen Gorman, Mass Media Bureau, distance separation requirements at city Federal Regulations is amended as (202) 418–2180. reference coordinates. The coordinates follows: SUPPLEMENTARY INFORMATION: This is a for Channel 296A at Lynchburg are 35– synopsis of the Commission’s Notice of 16–54 North Latitude and 86–22–24 PART 73ÐRADIO BROADCAST Proposed Rule Making, MM Docket No. West Longitude. SERVICES 00–194; MM Docket No. 00–195; MM The Commission requests comments 1. The authority citation for part 73 Docket No. 00–196; and MM Docket No. on a petition filed by Quevalle continues to read as follows: 00–197, adopted September 27, 2000, Communications proposing the and released October 11, 2000. The full allotment of Channel 284A at Rincon, Authority: 47 U.S.C. 154, 303, 334 and 336. text of this Commission decision is Texas, as the community’s first local § 73.202 [Amended] aural transmission service. Channel available for inspection and copying 2. Section 73.202(b), the Table of FM 284A can be allotted to Rincon in during normal business hours in the Allotments under Michigan, is amended compliance with the Commission’s FCC Reference Information Center by adding Paradise, Channel 234A. minimum distance separation (Room CY–A257), 445 12th Street, SW, 3. Section 73.202(b), the Table of FM requirements with a site restriction of Washington, DC. The complete text of Allotments under Tennessee, is 11.7 kilometers (7.3 miles) northwest of this decision may also be purchased amended by adding Channel 291A, city reference coordinates. The from the Commission’s copy contractor, Clinton and Lynchburg, Channel 296A. coordinates for Channel 284A at Rincon International Transcription Service, 4. Section 73.202(b), the Table of FM are 26–34–21 North Latitude and 98– Inc., (202) 857–3800, 1231 20th Street, Allotments under Texas, is amended by 41–27 West Longitude. Since Rincon is NW, Washington, DC 20036. adding Rincon, Channel 284A. The Commission requests comments located within 320 kilometers (199 on a petition filed by Clyde Scott, Jr., miles) of the U.S.-Mexican border, Federal Communications Commission. D.B.A. EME Communications proposing concurrence of the Mexican government John A. Karousos, the allotment of Channel 291A at has been requested. Chief, Allocations Branch, Policy and Rules Clinton, Tennessee, as the community’s Provisions of the Regulatory Division, Mass Media Bureau. third local FM transmission service and Flexibility Act of 1980 do not apply to [FR Doc. 00–27907 Filed 10–30–00; 8:45 am] fourth aural service. Channel 291A can this proceeding. BILLING CODE 6712±01±P
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Notices Federal Register Vol. 65, No. 211
Tuesday, October 31, 2000
This section of the FEDERAL REGISTER Purpose: Section 635(b) of the Foreign two years, the Board plans to address contains documents other than rules or Assistance Act (FAA) authorizes USAID center service mix standardization, proposed rules that are applicable to the to make grants and cooperative eBusiness, moving toward high public. Notices of hearings and investigations, agreements with any organization and performance centers, training and committee meetings, agency decisions and within limits of the FAA. Most of the education of field staff, MEP University, rulings, delegations of authority, filing of petitions and applications and agency information that USAID requests of its national awareness of the MEP program, statements of organization and functions are recipients is necessary to fulfill the international services, and others. examples of documents appearing in this requirement that USAID, as a Federal The Board will consist of nine section. agency, ensure prudent management of members to be appointed by the public funds under all of its assistance Director of the National Institute of instruments. The pre-award information Standards and Technology to assure a AGENCY FOR INTERNATIONAL is necessary to assure that funds are balanced membership that will DEVELOPMENT provided for programs that further the represent the views and needs of purposes of the FAA and that the customers, providers, and others Notice of Public Information recipients have the capability to manage involved in industrial extension Collections Being Reviewed by the the program administratively and throughout the United States. Agency for International Development; financially. The administration (post- The Board will function solely as an Comments Requested award) requirements are based on the advisory body and in compliance with SUMMARY: U.S. Agency for International need to assure that the program is the provisions of the Federal Advisory Development (USAID) is making efforts functioning adequately, that the funds Committee Act. Copies of the Board’s to reduce the paperwork burden. USAID are managed properly and that statutory revised charter will be filed with the invites the general public and other and regulatory requirements are appropriate committees of the Congress Federal agencies to take this complied with. and with the Library of Congress. opportunity to comment on the Annual Reporting Burden: Inquiries or comments may be following proposed and/or continuing Respondents: 400. directed to Linda Acierto, Senior Policy information collections, as required by Total annual responses: 1,100. Advisor, Manufacturing Extension the Paperwork Reduction Act for 1995. Total annual hours requested: 37,400 Partnership, National Institute of Comments are requested concerning: (a) hours. Standards and Technology, 100 Bureau Whether the proposed or continuing Dated: October 24, 2000. Drive, Shop 4800, Gaithersburg, Maryland 20899–4800; telephone: 301– collections of information is necessary Joanne Paskar, 975–5020. for the proper performance of the Chief, Information and Records Division, functions of the agency, including Office of Administrative Services, Bureau for Karen H. Brown, whether the information shall have Management. Deputy Director, NIST. practical utility; (b) the accuracy of the [FR Doc. 00–27918 Filed 10–30–00; 8:45 am] [FR Doc. 00–27900 Filed 10–30–00; 8:45 am] burden estimates; (c) ways to enhance BILLING CODE 6116±01±M the quality, utility, and clarity of the BILLING CODE 3510±13±M information collected; and (d) ways to minimize the burden of the collection of DEPARTMENT OF COMMERCE DEPARTMENT OF COMMERCE information on the respondents, including the use of automated Manufacturing Extension Partnership International Trade Administration collection techniques or other forms of National Advisory Board; Notice of [A±122±823] information technology. Renewal DATES: Submit comments on or before Preliminary Determination of In accordance with the provisions of January 2, 2001. Circumvention of Antidumping Order: the Federal Advisory Committee Act, 5 FOR FURTHER INFORMATION CONTACT: Cut-to-Length Carbon Steel Plate From U.S.C. App. 2, and the General Services Beverly Johnson, Bureau for Canada Management, Office of Administrative Administration (GSA) rule on Federal Services, Information and Records Advisory Committee Management, 41 AGENCY: Import Administration, Division, U.S. Agency for International CFR Part 101–6, and after consultation International Trade Administration, Development, Room 2.07–106, RRB, with GSA, the Secretary of Commerce Department of Commerce. Washington, DC 20523, (202) 712–1365 has determined that the renewal of the ACTION: Notice of Preliminary or via e-mail [email protected]. Manufacturing Extension Partnership Determination of Circumvention of SUPPLEMENTARY INFORMATION: National Advisory Board is in the public Antidumping Order: Cut-to-Length OMB No.: OMB 0412–0510. interest in connection with the Carbon Steel Plate from Canada. Form No.: N/A. performance of the duties imposed on Title: Administration or Assistance the Department by law. SUMMARY: We preliminarily determine Awards to U.S. Non-Government The Committee was first established that imports of certain cut-to-length Organizations—22 CFR part 226 and in October 1996 to advise MEP carbon plate products, known as grader USAID’s Automated Directive Systems regarding their programs, plans, and blade and draft key steel, falling within Chapter 303. policies. In reviewing the Board, the the physical dimensions outlined in the Type of Review: Renewal of Secretary has established it for an scope of the order, and containing a Information Collection. additional two years. During the next minimum of both 0.0008 percent boron
VerDate 112000 19:49 Oct 30, 2000 Jkt 194001 PO 00000 Frm 00001 Fmt 4703 Sfmt 4703 E:\FR\FM\31OCN1.SGM pfrm02 PsN: 31OCN1 Federal Register / Vol. 65, No. 211 / Tuesday, October 31, 2000 / Notices 64927 by weight and 0.55 percent carbon by amounts of boron and fall within the Steel) Court No. 98–08–02684. However, weight, and produced by Co-Steel physical dimensions outlined in the the Court of Appeals for the Federal Lasco, Inc. and Gerdau MRM Steel are scope of the order, are circumventing Circuit subsequently reversed the circumventing the antidumping duty the antidumping duty order on certain injunction, and on October 12, 2000, the order on cut-to-length carbon steel plate cut-to-length carbon steel plate from CIT dismissed the case. Thus, we are from Canada (58 FR 44162, August 19, Canada. KES alleged that, since proceeding with this inquiry and we 1993). publication of the antidumping duty will make our final determination no EFFECTIVE DATE: October 31, 2000. order, exporters of certain cut-to-length later than January 10, 2001. carbon steel plate from Canada have FOR FURTHER INFORMATION CONTACT: Scope of the Investigation Michael Panfeld or Rick Johnson, been circumventing the order by The scope language contained in the Import Administration, International exporting carbon steel plate with small amounts of boron added so as to avoid final determination and antidumping Trade Administration, U.S. Department coverage under the order. According to duty order describes the covered of Commerce, 14th Street and KES, the ‘‘inclusion of 0.0016 percent merchandise as follows: Constitution Avenue, NW, Washington, boron by weight to high carbon grader DC, 20230; telephone: (202) 482–0172 Certain Cut-to-Length Carbon Steel Plate blade and draft key steel constitutes a (Panfeld); (202) 482–3818 (Johnson). These products include hot-rolled carbon minor alteration’’ and is, therefore, steel universal mill plates (i.e., flat-rolled Applicable Statute within the meaning of the provisions products rolled on four faces or in a closed box pass, of a width exceeding 150 Unless otherwise stated, all citations detailed in section 781(c) of the Act. See Anticircumvention Application, January millimeters but not exceeding 1,250 to the statute are references to the millimeters and of a thickness of not less provisions effective January 1, 1995, the 30, 1998 at 4. On May 20, 1998, the Department than 4 millimeters, not in coils and without effective date of the amendments made initiated an anticircumvention inquiry patterns in relief), of rectangular shape, to the Tariff Act of 1930 (the Act) by the neither clad, plated nor coated with metal, on the antidumping order on Cut-to- Uruguay Round Agreements Act whether or not painted, varnished, or coated Length Carbon Steel Plate from Canada. (URAA). In addition, unless otherwise with plastics or other nonmetallic See Notice of Initiation of stated, all citations to the Department’s substances; and certain hot-rolled carbon Anticircumvention Inquiry: Cut-to- regulations are references to the steel flat-rolled products in straight lengths, Length Carbon Steel Plate from Canada, of rectangular shape, hot rolled, neither clad, regulations as codified at 62 FR 27296 63 FR 29179 (May 28, 1998). On June 5, plated, nor coated with metal, whether or not (May 19, 1997). 1998, the Department requested painted, varnished, or coated with plastics or SUPPLEMENTARY INFORMATION: information from Canadian producers other nonmetallic substances, 4.75 millimeters or more in thickness and of a Background which were listed as producers of either grader blade or draft key steel in Iron width which exceeds 150 millimeters and On March 14, 1997, at the request of and Steel Works of the World, 12th measures at least twice the thickness, as petitioner, Kentucky Electric Steel currently classifiable in the HTS under item edition. On June 26, 1998 and July 17, numbers 7208.31.000, 7208.32.000, (‘‘KES’’), the Department of Commerce 1998, Gerdau MRM Steel (‘‘MRM’’) and (‘‘the Department’’) initiated a scope 7208.33.1000, 7208.33.5000, 7208.41.000, Co-Steel Lasco (‘‘CSL’’), respectively, 7208.42.000, 7208.43.0000, 7208.90.0000, inquiry to determine whether certain responded to the Department’s 7210.70.3000, 7210.90.9000, 7211.11.0000, cut-to-length carbon steel plate used to questionnaire, identifying themselves as 7211.12.0000, 7211.21.0000, 7211.22.0045, make grader blades and draft keys producers of carbon steel products with 7211.90.0000, 7212.40.1000, 7212.40.5000, (‘‘grader blade’’ and ‘‘draft key’’ steel) over 0.0008 percent boron. Based on and 7212.50.0000. Included in these that contain small amounts of boron fall these responses, the Department issued investigations are flat-rolled products of within the scope of the order on certain a full questionnaire to both CSL and nonrectangular cross-section where such cut-to-length carbon steel plate from MRM on July 30, 1998. CSL filed its cross-section is achieved subsequent to the rolling process (i.e., products which have Canada. response on September 28, 1998. MRM On January 16, 1998, the Department been ‘‘worked after rolling’’)-for example, filed its response on October 6, 1998. products which have been beveled or issued a ruling, based on 19 CFR section On October 7, 1998, the Department rounded at the edges. Excluded from these 353.29(i), that boron-added grader blade issued a supplemental questionnaire to investigations is grade X–70 plate. and draft key steel falls outside the CSL, who responded on October 14, Although the Harmonized Tariff Schedule literal scope of the order. The scope of 1998. On November 6, 1998, the of the United States (HTS) subheadings are the original antidumping investigation Department issued a supplemental provided for convenience and customs relied on the HTSUS definition of questionnaire to MRM, which purposes, our written descriptions of the carbon steel, which distinguishes other- responded on December 7, 1998. scope of these proceedings are dispositive. alloy steel (i.e. including steel From October 26 through October 28, Determination; Certain Cold-Rolled containing more that 0.0008 percent 1998, Department officials conducted a Carbon Steel Flat Products From boron). Because the petition equated the verification of CSL. The Department Argentina, 58 FR 37063 (July 9, 1993), term ‘‘carbon steel’’ with the HTSUS reviewed documents and made Appendix I. See also Antidumping Duty term ‘‘non-alloy steel’’, variants of inquiries of CSL officials with regard to Orders: Certain Corrosion-Resistant grader blade and draft key steel which the sales and production of grader blade Carbon Steel Flat Products and Certain contain at least 0.0008 percent boron by and draft key carbon steel with and Cut-to-Length Carbon Steel Plate From weight fell outside the literal scope of without boron added. Canada, 58 FR 44162 (August 19, 1993). the order. Algoma Steel Inc. and Caterpillar Inc. On January 30, 1998, KES requested have also filed notices of appearance Scope of the Anticircumvention Inquiry that the Department conduct an with the Department as interested The merchandise subject to this anticircumvention inquiry pursuant to parties to this inquiry. inquiry is certain cut-to-length plate, section 781(c) of the Act to determine On December 16, 1998, the Court of commonly known as grader blade and whether imports of certain cut-to-length International Trade (‘‘CIT’’) enjoined draft key steel, made of in-scope high steel plate used to make grader blades further proceeding with this inquiry. carbon steel to which a small amount of and draft keys that contain small See Co-Steel Lasco v. United States (Co- boron (minimum 0.0008 percent boron
VerDate 112000 19:49 Oct 30, 2000 Jkt 194001 PO 00000 Frm 00002 Fmt 4703 Sfmt 4703 E:\FR\FM\31OCN1.SGM pfrm02 PsN: 31OCN1 64928 Federal Register / Vol. 65, No. 211 / Tuesday, October 31, 2000 / Notices by weight) has been added, falling the law in this area. In Wheatland Tube contain small amounts of boron are within the physical dimensions Co. v. United States, the CAFC held circumventing the order on cut-to- outlined in the scope of the order. High that, under the facts of that case, an length carbon steel plate from Canada. carbon steel is defined as steel of AISI anticircumvention inquiry was not As discussed above, minor alteration or SAE grades 1050, 1152, or 1552, or appropriate. However, the appellate anticircumvention inquiries are used higher, i.e., carbon steels that may court also determined that ‘‘(i)n essence, when a petitioner claims that, although contain 0.55 percent or more carbon by section 1677j(c) includes within the a product falls outside the literal scope weight. ‘‘Grader blade’’ steel is typically scope of an antidumping order products of an order, the product should used in grading equipment such as that are so insignificantly changed from nevertheless be considered within the bulldozers and snowplows. ‘‘Draft key’’ a covered product that they should be scope of an order because it results from steel is used specifically to make considered within the scope of the order an insignificant minor alteration of the locking mechanisms for railroad even though the alterations remove in-scope product. couplings. Unless otherwise indicated, them from the order’s literal scope.’’ See Carbon steel is produced by first the terms ‘‘boron-added grader blade Wheatland Tube Co. v. United States, and draft key carbon steel’’, ‘‘boron- 161 F.3d 1365 (1998) at 12. Thus, under melting scrap and/or iron ore with added steel for use in grader blades and Wheatland, the Department may charge carbon in a furnace. Once the draft keys’’ and ‘‘boron-added steel’’ are properly inquire whether, although the steel is sufficiently heated, it is synonymous for the purpose of this merchandise in question is outside the transferred to a ladle arc refiner, where notice. order’s literal scope, the merchandise alloys are added according to the has been altered from an in-scope specification required. When the steel’s Analysis product in such a minor way that it chemistry meets specifications, it is Section 781 of the Act addresses the should be considered within the scope poured into a caster to form billets. prevention of circumvention of of the order. These billets are cut and cooled. After antidumping and countervailing duty Petitioner has alleged, and the facts the billets have cooled, they are orders. Subsection 781(c) specifically discovered by the Department to-date reheated and sent to the structural mill, provides that: have shown, that the out-of-scope where the billets are rolled and cut (1) In general—The class or kind of boron-added carbon grader blade and according to the customer’s merchandise subject to— draft key steel is made through an specifications. economically and metallurgically (A) an investigation under this title, The only difference in the production (B) an antidumping duty order issued insignificant alteration of in-scope of boron-added carbon steel versus under section 736, carbon steel. Consequently, this case (C) a finding under the Antidumping presents precisely the sort of inquiry ordinary carbon steel is in the refining Act of 1921, or authorized by the court in Wheatland. stage, where boron is simply added to (D) a countervailing duty order issued Additionally, in a related case the molten steel. All that is required to under section 706 or section 303, shall involving nearly identical facts and the meet the HTSUS threshold level of include articles altered in form or same scope issue, Nippon Steel 0.0008 percent boron is the addition of appearance in minor respects (including Corporation v. United States, 219 F.3d less than 100 pounds of boron to more raw agricultural products that have 1348 (Fed. Cir., July 26, 2000) than a hundred tons of molten steel. All undergone minor processing), whether (‘‘Nippon’’), the CAFC further clarified other aspects of production are exactly or not included in the same tariff that the minor alteration inquiry in the same as those for carbon steel. As classification. Wheatland was prohibited only because discussed in ‘‘Cost of Modification’’ (2) Exception—Paragraph (1) shall not the product in question was well-known below, not only was the alteration to the apply with respect to altered prior to the order and was specifically production ‘‘minor’’ in all respects, the merchandise if the administering excluded from the investigation. In this cost of this alteration was also ‘‘minor’’: authority determines that it would be respect, the Court in Nippon approximately one third of one percent unnecessary to consider the altered distinguished Wheatland from the of the sales price. For a further merchandise within the scope of the inquiry involving boron-added carbon discussion of this issue, see Decision investigation, order or finding. steel, and determined that a Memo at 6. circumvention inquiry of such a product The Scope Review and the Holdings of Respondent CSL argues that ‘‘alloy (boron-added carbon steel) was proper. the U.S. Courts steel plate,’’ or boron-added grader See Decision Memorandum: Preliminary blade and draft key steel, cannot be In its final determination of the scope Determination of Circumvention of the made by altering carbon steel plate. CSL ruling noted above, the Department Antidumping Duty Order: Certain Cut- states that in order for carbon steel found that the scope did not include to-Length Carbon Steel Plate from plate, the subject merchandise, to be grader blade steel and draft key steel Canada (‘‘Decision Memo’’) from Joseph altered into alloy steel plate, the carbon produced with 0.0008 percent boron or A. Spetrini to Troy Cribb dated October more by weight (‘‘boron-added steel’’), 23, 2000. Moreover, the Federal Circuit steel plate would have to be remelted in the merchandise in question in this in this case (Co-Steel) adopted the order to introduce boron into the molten inquiry. Respondents have argued in Nippon opinion by reference and found steel, and then follow the production this case that by finding that the product that the circumvention inquiry was process from pouring billets to cutting is outside the scope of the order, the indeed proper. See Co-Steel Lasco v. rolled plate. However, respondent Department may not initiate a ‘‘minor United States, 99–1339 (September 22, misinterprets the minor alterations alterations’’ anticircumvention inquiry, 2000). As a result, on October 12, 2000, provision. Neither the statute nor its citing the decision of the CIT in the CIT in this case dissolved the legislative history require that a minor Wheatland Tube Co. v. United States, injunction and dismissed the complaint. alteration be made to a finished product. 973 F.Supp. 149 (CIT 1997). Indeed, the legislative history indicates Since the time of initiation, the Minor Alterations that Congress anticipated that slight United States Court of Appeals for the Petitioner alleges that imports of changes in production might allow an Federal Circuit (‘‘CAFC’’) has clarified grader blade and draft key steel that exporter to circumvent an order.
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Factors of Consideration whether boron added to high carbon the same physical and metallurgical While the statute is silent regarding steel improves toughness. CSL officials properties of its carbon steel what factors to consider in determining also stated that to the best of their counterpart. whether alterations are properly knowledge, no other producer uses Based on the record evidence, the considered ‘‘minor,’’ the legislative boron as a grain refiner in high carbon Department finds that there is no history of this provision indicates that steel. See Verification Report at 14. CSL substantial difference in the physical characteristics between boron-added there are certain factors which should stated that it did not represent to its and carbon steel—indeed the be considered before reaching an customers that the boron-added steel differences are ‘‘minor’’. Both kinds of anticircumvention determination. The was an improvement over the carbon steel are produced to the same petitioner cites to the Senate Finance steel, because it could not quantify the specifications with the exception of Committee report on the Omnibus Trade improvement. However, CSL was aware boron content. Although respondents and Competitiveness Act of 1988 (which that there were tests that could indicate claim that differences exist in terms of amended the Tariff Act of 1930 to if the boron was improving toughness. One of these tests is a test for grain size. toughness and through hardening, include the anticircumvention The smaller the grain size of the steel, neither respondent has made any effort provisions contained in section 781), the tougher it is. We believe that record to confirm and quantify any which states: evidence indicates that CSL did not improvement that would indicate a [i]n applying this provision, the Commerce assign a high priority to confirming the difference in physical characteristics. Department should apply practical alleged improvement to the boron- The record evidence indicates that measurements regarding minor alterations, so added steel. See Decision Memorandum. respondents are not primarily that circumvention can be dealt with concerned with the steel’s purported effectively, even where such alterations to an Gerdau MRM Steel article technically transform it into a improvement. Respondent MRM contends that the differently designated article. The Commerce Expectations of the Ultimate Users Department should consider such criteria as addition of boron facilitates the the overall physical characteristics of the formation of martensite, which, if the The petitioner maintains that carbon merchandise, the expectations of the ultimate steel is subsequently heat treated and steel users purchase high carbon steel users, the use of the merchandise, the quick-quenched (a process of raising the with the expectation that the product be channels of marketing and the cost of any temperature of the metal to a ‘‘critical’’ especially hard and durable, and that modification relative to the total value of the level and cooling it rapidly), imparts these characteristics are imparted by the imported products. S. Rep. No.71, 100th greater hardenability to the steel, presence of sufficient levels of carbon. Cong., 1st Sess. 100 (1987). particularly ‘‘through hardness.’’ MRM Petitioner states that consumers of this KES presented evidence with respect has stated that ‘‘it is of the opinion that product are fully aware that carbon steel to each of the criteria listed in the all customers who purchase alloy grade of the sort at issue does not rely on or Senate report, and the Department has steel do include heat treatment and/or benefit from the presence of boron, and examined the information on the record flame hardening as part of their thus ‘‘do not expect, seek, or desire’’ its regarding each of these criteria. Our production process.’’ See MRM presence. findings are discussed below. submission, dated October 6, 1998. Typical uses for grader blade steel are However, both CSL and petitioner have blades for snowplows and bulldozers. Overall Physical Characteristics stated that grader blade and draft key Draft key steel is used to make locking The cut-to-length plate product at customers do not heat treat steel. devices for railroad car couplings. issue in this inquiry is a high carbon Moreover, MRM’s discussion of Because of their application, customers steel (minimum 0.55 percent by weight) martensite only appears to apply to low require and expect that the steel they with small amounts of boron added. The carbon steel, not to the high carbon buy will be hard. The primary petitioner claims that while boron is grade blade and draft key steels which characteristic of high carbon steel is its traditionally added to steel to improve are the subjects of this inquiry. See hardness, due to the level of carbon. ‘‘hardenability,’’ when the level of Decision Memo at 8. Although CSL and MRM claim to have carbon is already at 0.60 percent by In addition, respondents have often improved the steel, no evidence has weight or above, the added boron’s referred to the boron-added grader blade been presented to significantly effect on the final product is negligible. steel as an ‘‘alloy steel’’ and have distinguish boron-added steel from the For this reason, petitioner claims that it discussed general differences between in-scope high carbon steel in terms of is the steelmaking industry’s practice ‘‘alloy steel’’ and carbon steel. However, use or performance. CSL reports that not to add boron to high-carbon grades. we believe that this reference is there is no application that restricts misleading. Although the carbon steel to customers to using boron-added steel Co-Steel Lasco which a small amount of boron has been versus a carbon steel. MRM presented According to CSL, the only added is technically an ‘‘other alloy’’ no evidence for the record that metallurgical difference between boron- steel for the purposes of the HTSUS customers could use the boron-added added steel and carbon steel is the classification, a true alloy steel as steel in applications where they could amount of boron added. All other recognized by the industry is markedly not use the carbon steel. specifications remain the same, within a different from the product at issue. The given ASTM grade. CSL contends that ITC Staff Report describes a true alloy Co-Steel Lasco its rationale for adding boron is not to steel as a significantly higher priced Respondent CSL reports that the increase hardness, but to improve the product with distinct characteristics and decision to use boron was not the result grain size, and therefore, the uses, containing much higher levels of of customer dissatisfaction, specific ‘‘toughness’’ of the steel. ‘‘Toughness’’ alloys. Staff Report, Certain Flat-Rolled requests, or problems with the process refers to the steel’s ability to withstand Carbon Steel Products from Various of production. CSL reported at shearing, breaking and cracking on Countries, USITC Pub. 2664, Vol. 2 verification that customers did not impact. At verification, CSL officials (August 1993), at I–37. The ‘‘alloy’’ steel request boron, and have to date made no stated that members of the steelmaking produced by respondents has, with the comment regarding its addition, or any industry were ‘‘skeptical’’ regarding exception of its boron content, exactly purported improvement. In addition,
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CSL did not indicate to its customers not grader blade products. This that CSL’s boron costs and MRM’s costs that the boron-added product was evidence, coupled with the sales and are similar, and therefore, the price significantly better than the carbon marketing process of direct contact with differential would also be similar. product, nor did the company charge customers, indicates that MRM is fully Additional Factors more for the product. CSL reported that aware of customers’ use of the it only told its customers that boron was merchandise. MRM has not presented In addition to the criteria above, we being added to the steel as a grain any evidence that indicates that boron- note that the Department has in a prior refiner, and that its addition ‘‘wouldn’t added steel is used in a manner anticircumvention proceeding hurt the steel.’’ Record evidence offers different from that of ordinary carbon considered other factors as relevant to other indications that CSL has sold both steel. For a further discussion of this the circumvention allegation. These boron-added and carbon grader blade issue, see Decision Memo. factors are: (i) the circumstances under steel to its customers, and that none of which the subject products entered the Channels of Marketing CSL’s customers made any distinction United States, (ii) the timing of these between the two products. For a further The petitioner states that steel entries during the circumvention review discussion of this issue, see Decision producers, with few exceptions, sell period, and (iii) the total quantity of the Memo. directly to manufacturers of grader merchandise entered during this period. blades and draft keys through company See Brass Sheet and Strip from Gerdau MRM Steel sales forces. Petitioner claims that, Germany; Negative Preliminary MRM has not presented any because carbon grader blade and draft Determination of Circumvention of corroborated evidence that the ultimate key steels are used for precisely the Antidumping Duty Order, 55 FR 32655 users of its products have any same products as are the boron-added (August 10, 1990). expectations with regard to any versions of the products, boron-added 1. Circumstances Under Which the improvement in the increased surface steel is sold in precisely the same sales and through hardness of the boron- channels as carbon steel. Products Enter the United States added grader blade and draft key steel The grader blade and draft key steel The Department is not required to vis-a-vis an ordinary carbon grader market has been reported to be mature, determine intent during a blade and draft key steel. For a further with few customers and a limited circumvention inquiry. Nevertheless, discussion of this issue, see Decision number of suppliers. Record evidence the facts surrounding CSL’s production Memo. indicates that CSL and MRM have sold and importation of boron-added steel their products to the same U.S. tend to indicate a deliberate attempt to Use of the Merchandise customers before and after the modify carbon steel so as to avoid the The petitioner maintains that, with or investigation in 1993. Both CSL and effects of the antidumping duty order. without boron, high carbon grader blade MRM have stated that their products are Record evidence indicates that CSL and draft key steel have the same uses: marketed by direct contact with the clearly distinguishes its boron-added making blades on grading equipment customer, and have made no distinction grader blade and carbon grader blade. and locking devices on railroad between the sales and marketing process CSL’s own metallurgical specification couplings. The petitioner states that for either the boron-added or carbon records indicate a deliberate effort to knowledgeable purchasers would be steel. avoid antidumping duties on products aware that there are no uses of high shipped to the United States. Boron- carbon steel containing small amounts Cost of Modification added grader blade steel is almost of boron that cannot fully be met Petitioner alleges that, by adding exclusively, and seemingly by design, without boron, and that the addition of boron to high carbon steels, Canadian produced for U.S. customers, while boron neither responds to a new need in producers have been able to avoid grader blade steel without boron the market, nor improves the way dumping duties ranging from 1.47 represents the vast majority of products existing technical needs are met. percent to 68.7 percent, and that the sold to Canadian customers. If the CSL reports that there is no difference cost of avoiding these duties, relative to addition of boron served any purpose in the use of the boron-added product the total value of the product itself, is other than circumvention, we would versus the carbon product, both in its negligible. Based on records examined expect to see boron added to steel responses and at verification. As noted at verification of CSL, the additional regardless of whether the customer was above in ‘‘Expectations of End-Users,’’ cost of making a boron-added steel is located in the United States or Canada. CSL has sold both boron-added and wholly insignificant. For a further For a further discussion of this issue, carbon steel to the same customer, and discussion of this issue, see Decision see Decision Memo. has not received any comments Memo. concerning any differences in MRM claims that ‘‘it has no basis for 2. The Timing of the Entries During the application or performance. a comparison between carbon steel and Circumvention Review Period MRM claims that it ‘‘cannot state with high-carbon/boron alloy steel.’’ See Generally speaking, a preliminary certainty what their customers MRM response, dated December 7, affirmative determination by the ‘‘intended use’’ was or is with alloy 1998, at 4. MRM’s only reference to a Department in an antidumping steel or carbon steel.’’ See MRM price difference between carbon steel investigation is seen by foreign response, October 6, 1998, at 15. and ‘‘high-carbon/boron alloy steel’’ is a manufacturers/exporters as the first However, the sales-related comparison of all carbon steels (not just reliable indication that antidumping documentation MRM submitted in its grader blade and draft key steels) in duties will most likely be imposed. This responses indicate that MRM did have unadjusted dollars over a four year is because it is the first formal knowledge of its customers’ use of the period. Id. However, MRM has not made determination by the Department, and merchandise. Every sample sale any claim regarding additional cost in the first time the Department directs the presented by MRM in its October 6 and the cost of producing a boron-added Customs Service to suspend liquidation December 7, 1998 responses include steel vis-a-vis a carbon steel without and collect a cash deposit of estimated descriptions of products that are either boron. If the only additional cost is the dumping duties. In the antidumping clearly grader blade products, or clearly cost of the boron, it may be assumed investigation of cut-to-length carbon
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See length carbon steel plate from Canada. of the Department’s regulations, we are Notice of Preliminary Determinations of While carbon steel plate products directing the U.S. Customs Service to Sales at Less Than Fair Value: Certain containing over 0.0008 percent boron by suspend liquidation of all imports of Hot-Rolled Carbon Steel Flat Products, weight are, by definition, technically high carbon (minimum 0.55 percent by Certain Cold-Rolled Carbon Steel Flat outside the literal scope of the weight) cut-to-length carbon steel plate Products, Certain Corrosion-Resistant antidumping duty order, we have with boron (minimum 0.0008 percent by Carbon Steel Flat Products, and Certain preliminarily determined that, pursuant weight), falling within the physical Cut-to-Length Carbon Steel Plate from to ‘‘minor alterations’’ provision of the parameters outlined in the scope of this Canada, 58 FR 7085 (February 4, 1998). statue, it is appropriate to include the CSL’s records indicate that boron- order, manufactured or exported by Co- putatively out-of-scope boron-added Steel Lasco or Gerdau MRM Steel that added steel, technically out of the scope steel, which is the subject of this of the order, was first produced shortly are entered, or withdrawn from inquiry, in the class or kind of warehouse, for consumption on or after after the publication of the preliminary merchandise subject to the order on cut- affirmative determination. This suggests the date of publication of this notice in to-length carbon steel plate. See Section the Federal Register. We will also that the addition of boron may have 781(c) of the Act. been in response to the preliminary instruct the U.S. Customs Service to determination. Boron-added steel is made by slightly require a cash deposit of estimated Each ‘‘batch’’ of steel, called a heat, altering carbon steel during its duties for each unliquidated entry of the has a specific chemistry, namely, the production process. With the exception product entered, or withdrawn from content levels of certain elements and of the presence of boron, boron-added warehouse, on or after the date of alloys in the heat. On one occasion, CSL steel has the same physical initiation of this inquiry, in accordance appears to have modified a heat to characteristics as carbon steel. There are with section 351.225(1)(2) of our contain boron levels above the HTSUS no differences in the expectations of the regulations. We will instruct the U.S. threshold. This could indicate a ultimate users, uses of the merchandise, Customs Service to require a cash deliberate attempt to exceed the 0.0008 and channels of marketing between deposit at the applicable rates for MRM percent threshold. For a further boron-added steel and the subject and CSL listed below. These discussion of this issue, see Decision merchandise. Furthermore, the cost of suspension-of-liquidation instructions Memo. adding boron in the course of will remain in effect until further notice. The facts surrounding MRM’s production is negligible. Since the production and importation of boron- Weighted- original investigation, respondents have average added steel also indicates shifted their entire production for U.S. Exporter/manufacturer margin circumvention. According to MRM’s customers away from in-scope carbon percentage July 17, 1998 response, boron-added steel to out-of-scope carbon steel to out- grader blade and draft key steels were of-scope boron-added steel. No similar Co-Steel Lasco ...... 61.88 not sold to either Canadian or U.S. shift has occurred in the home market, Gerdau MRM Steel ...... 0.0 customers prior to 1993, but were sold where the majority, if not all, of both exclusively to U.S. customers after 1993, respondents’ production is devoted to As a result of this preliminary the year of the investigation. In contrast, carbon grader blade and draft key steel determination, the merchandise subject with the exception of a negligible without boron. The timing of this shift to the scope of this order includes amount, all of MRM’s sales to its further indicates circumvention of the merchandise entered under the following additional HTSUS number: Canadian customers, before and after order by making a minor alteration. 7211.14.0030. 1993, involved grades that did not Taken as a whole, this evidence leads to include boron. For a further discussion our determination that boron-added Public Comment of this issue, see Decision Memo. grader blade and draft key steel is being Case briefs or other written comments 3. The Quantity of Merchandise Entered produced in circumvention of the in at least ten copies must be submitted During the Circumvention Review antidumping law, undermining its to the Assistant Secretary for Import Period intent, and eviscerating its effectiveness. Administration no later than 30 days Record evidence indicates that, after After a thorough analysis of the after the publication of the preliminary the investigation in 1993, both CSL and physical characteristics of the determination, and rebuttal briefs, MRM shifted all of their production for merchandise subject to this inquiry, the limited to issues raised in case briefs, no U.S. customers to boron-added steel. expectations of the ultimate users, the later than 35 days after the publication Sales data submitted by both ultimate use of the merchandise, the of the preliminary determination. A list respondents indicate that all grader cost of modification, and the additional of authorities used and an executive blade and draft key steel sold in the factors listed above, we have summary of issues should accompany United States has boron added, while determined that Canadian any briefs submitted to the Department. steel sold in Canada is, for the most manufacturers/exporters of grader blade Such summary should be limited to five part, produced without boron. Neither and draft key steel have made minor pages total, including footnotes. We will respondent has presented any evidence alterations in their in-scope hold a public hearing, if requested, to that explains why only U.S. customers merchandise within the meaning of afford interested parties an opportunity are sold the allegedly ‘‘improved’’ section 781(c) of the Act, resulting in to comment on arguments raised in case boron-added steel. circumvention of the antidumping order or rebuttal briefs. Tentatively, the covering certain cut-to-length carbon hearing will be held 37 days after the Preliminary Ruling steel plate from Canada. This publication of the preliminary As a result of our inquiry, we preliminary determination extends only determination, time and room to be preliminarily determine that exports of to those products manufactured by Co- determined, at the U.S. Department of boron-added grader blade and draft key Steel Lasco and Gerdau MRM Steel. Commerce, 14th Street and Constitution
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Avenue, N.W., Washington, D.C. 20230. outcome of the seventh Multilateral Permits and Documentation Division, Parties should confirm by telephone the High Level Conference for tuna Office of Protected Resources, NMFS, time, date, and place of the hearing 48 management in the Central-West Pacific, 1315 East-West Highway, Room 13705, hours before the scheduled time. the pros and cons for a marine Silver Spring, MD 20910 (301/713– Interested parties who wish to request recreational fishery license in Hawaii, 2289); and a hearing, or to participate if one is recreational bag limits and minimum Northeast Region, NMFS, One requested, must submit a written sizes for sale, effectiveness of bottomfish Blackburn Drive, Gloucester, MA request to the Assistant Secretary for closed areas in the Main Hawaiian 01930–2298; phone (508)281–9250; fax Import Administration, U.S. Department Islands, new Council Advisory Panels (508)281–9371. of Commerce, Room 1870, within 30 and the future of the RFDTF. Written comments or requests for a days of the publication of this notice. Although non-emergency issues not public hearing on this request should be Requests should contain: (1) The party’s contained in this agenda may come submitted to the Chief, Permits and name, address, and telephone number; before this group for discussion, those Documentation Division, F/PR1, Office (2) the number of participants; and (3) issues may not be the subject of formal of Protected Resources, NMFS, 1315 a list of the issues to be discussed. Oral action during this meeting. Action will East-West Highway, Room 13130, Silver presentations will be limited to issues be restricted to those issues specifically Spring, MD 20910. Those individuals raised in the briefs. If this investigation identified in this notice and any issues requesting a hearing should set forth the proceeds normally, we will make our arising after publication of this notice specific reasons why a hearing on this final determination no later than that require emergency action under particular amendment request would be January 10, 2001. section 305(c) of the Magnuson-Stevens appropriate. This determination is issued and Fishery Conservation and Management Comments may also be submitted by published in accordance with section Act, provided the public has been facsimile at (301) 713–0376, provided 777(i)(1) of the Act. notified of the Council’s intent to take the facsimile is confirmed by hard copy final action to address the emergency. Dated: October 23, 2000. submitted by mail and postmarked no Troy H. Cribb, Special Accommodations later than the closing date of the comment period. Please note that Acting Assistant Secretary for Import This meeting is physically accessible Administration. comments will not be accepted by e- to people with disabilities. Requests for mail or other electronic media. [FR Doc. 00–27949 Filed 10–30–00; 8:45 am] sign language interpretation or other FOR FURTHER INFORMATION CONTACT: BILLING CODE 3510±DS±P auxiliary aids should be directed to Kitty M. Simonds, 808-522-8220 (voice) Simona Roberts or Ruth Johnson, 301/ or 808-522-8226 (fax), at least 5 days 713–2289. DEPARTMENT OF COMMERCE prior to meeting date. SUPPLEMENTARY INFORMATION: The subject amendment to Permit No. 633– Dated: October 25, 2000. National Oceanic and Atmospheric 1483, issued on March 3, 1999 (64 FR Administration Richard W. Surdi, 10276), is requested under the authority Acting Director, Office of Sustainable [I.D. 102400E] of the Marine Mammal Protection Act of Fisheries, National Marine Fisheries Service. 1972, as amended (16 U.S.C. 1361 et Western Pacific Fishery Management [FR Doc. 00–27875 Filed 10–30–00; 8:45 am] seq.), the Regulations Governing the Council; Public Meeting BILLING CODE 3510±22±S Taking and Importing of Marine Mammals (50 CFR part 216), the AGENCY: National Marine Fisheries Endangered Species Act of 1973, as Service (NMFS), National Oceanic and DEPARTMENT OF COMMERCE amended (16 U.S.C. 1531 et seq.), and Atmospheric Administration (NOAA), the regulations governing the taking, Commerce. National Oceanic and Atmospheric Administration importing, and exporting of endangered ACTION: Notice of public meeting. and threatened species (50 CFR 222– [I.D. 101900B] SUMMARY: The Western Pacific Fishery 227). Permit No. 633–1483 authorizes the Management Council’s (Council) Marine Mammals; File No. 633±1483±03 Recreational Fisheries Data Task Force permit holder to (Project I): (1) conduct (RFDTF) will hold a meeting. AGENCY: National Marine Fisheries behavioral observations of, and photo- identify northern right whales during DATES: The meeting will be held Service (NMFS), National Oceanic and November 15, 2000, from 8:30 a.m. to 5 Atmospheric Administration (NOAA), aerial and vessel surveys; (2) place VHF p.m. Commerce. tags on right whales during the course ACTION: of vessel surveys; (3) collect skin and ADDRESSES: The meeting will be held at Receipt of application for amendment. blubber biopsy samples and sloughed the Western Pacific Fishery skin; and (4) export skin samples for Management Council office, 1164 SUMMARY: Notice is hereby given that Dr. genetic analysis. And, under Project II Bishop St., Suite 1400, Honolulu, HI Charles A. Mayo, Center for Coastal (humpback whales), to: (1) develop a 96813. Studies, 59 Commercial Street P.O. Box genealogy of the Gulf of Maine FOR FURTHER INFORMATION CONTACT: 1036, Provincetown, Massachusetts humpback whale population; (2) Kitty M. Simonds, Executive Director; 02657, has requested an amendment to determine paternity and evaluate male telephone: 808-522-8220. scientific research Permit No. 633–1483. reproductive success; (3) evaluate the SUPPLEMENTARY INFORMATION: This will DATES: Written or telefaxed comments influence of relatedness on feeding be the sixth meeting of the RFDTF and must be received on or before November distribution, behavior and social will discuss the following topics: the 30, 2000. organization; (4) determine individual implementation of the NMFS Marine ADDRESSES: The amendment request movement and habitat preferences; (5) Recreational Fisheries Statistical Survey and related documents are available for evaluate rates and severity of (MRFSS), Pelagic Environmental Impact review upon written request or by entanglement; (6) monitor trends in Statement & recreational fisheries, appointment in the following office(s): abundance, reproductive rates,
VerDate 112000 19:49 Oct 30, 2000 Jkt 194001 PO 00000 Frm 00007 Fmt 4703 Sfmt 4703 E:\FR\FM\31OCN1.SGM pfrm02 PsN: 31OCN1 Federal Register / Vol. 65, No. 211 / Tuesday, October 31, 2000 / Notices 64933 recruitment, and mortality; and (7) participation in the approval process intensity and quality of clinical opportunistically photo-identify and would defeat the purpose of the experiences for prospective teachers. biopsy sample various Balaenopterid information collection, violate State or The evaluation will measure the impact species. Federal law, or substantially interfere of grants in helping colleges of With this application for amendment, with any agency’s ability to perform its education, colleges of arts and sciences, the permit holder requests authorization statutory obligations. The Leader, school districts and other partners to (Project III) to attach a non-invasive Regulatory Information Management work more closely together to improve optical device (‘‘critter cam’’) to seven Group, Office of the Chief Information the content and structure of the North Atlantic right whales in Cape Cod Officer, publishes that notice containing professional education offered to Bay for collecting video documentation proposed information collection prospective teachers. in order to better assess prey selectivity requests prior to submission of these Requests for copies of the proposed and movements of the whales during requests to OMB. Each proposed information collection request may be foraging and the quality of the food information collection, grouped by accessed from http://edicsweb.ed.gov, or layer supporting the whales. This office, contains the following (1) Type of should be addressed to Vivian Reese, documentation will provide a review requested, e.g. new, revision, Department of Education, 400 Maryland subsurface tool for supplementing CCS’ extension, existing or reinstatement; (2) Avenue, SW, Room 4050, Regional on-going oceanographic surveys and for Title; (3) Summary of the collection; (4) Office Building 3, Washington, D.C. ‘‘ground-truthing’’ current estimates of Description of the need for and 20202–4651. Requests may also be prey patch density and area in Cape Cod proposed use of, the information; (5) electronically mailed to the internet Bay. Respondents and frequency of address OCIO–IMG–[email protected] or In compliance with the National collection; and (6) Reporting and/or faxed to 202–708–9346. Please specify Environmental Policy Act of 1969 (42 Recordkeeping burden. OMB invites the complete title of the information U.S.C. 4321 et seq.), an initial public comment. The Department of collection when making your request. determination has been made that the Education is especially interested in Comments regarding burden and/or the activity proposed is categorically public comment addressing the collection activity requirements should excluded from the requirement to following issues: (1) Is this collection be directed to Joseph Schubart at (202) prepare an environmental assessment or necessary to the proper functions of the 708–9266 or via his internet address environmental impact statement. Department; (2) will this information be [email protected]. Individuals who Concurrent with the publication of processed and used in a timely manner; use a telecommunications device for the this notice in the Federal Register, (3) is the estimate of burden accurate; deaf (TDD) may call the Federal NMFS is forwarding copies of this (4) how might the Department enhance Information Relay Service (FIRS) at 1– application to the Marine Mammal the quality, utility, and clarity of the 800–877–8339. Commission and its Committee of information to be collected; and (5) how [FR Doc. 00–27863 Filed 10–30–00; 8:45 am] Scientific Advisors. might the Department minimize the BILLING CODE 4000±01±P Dated: October 25, 2000. burden of this collection on the Ann D. Terbush, respondents, including through the use Chief, Permits and Documentation Division, of information technology. DEPARTMENT OF EDUCATION Office of Protected Resources, National Dated: October 25, 2000. Submission for OMB Review; Marine Fisheries Service. John Tressler, Comment Request [FR Doc. 00–27873 Filed 10–30–00; 8:45 am] Leader, Regulatory Information Management, BILLING CODE 3510±22±S Office of the Chief Information Officer. AGENCY: Department of Education. Office of the Undersecretary SUMMARY: The Leader, Regulatory Information Management Group, Office DEPARTMENT OF EDUCATION Type of Review: New. of the Chief Information Officer invites Title: Evaluation of the Partnership comments on the submission for OMB Notice of Proposed Information Grants Program of Title II of the Higher review as required by the Paperwork Collection Requests Education Act. Reduction Act of 1995. Frequency: Annually; Weekly. AGENCY: Department of Education. DATES: Interested persons are invited to Affected Public: Not-for-profit submit comments on or before SUMMARY: The Leader, Regulatory initiations; State, Local, or Tribal Gov’t, November 30, 2000. Information Management Group, Office SEAs or Leas. of the Chief Information Officer, invites Reporting and Recordkeeping Hour ADDRESSES: Written comments should comments on the proposed information Burden: be addressed to the Office of collection requests as required by the Responses: 453. Information and Regulatory Affairs, Paperwork Reduction Act of 1995. Burden Hours:963. Attention: Lauren Wittenberg, Acting DATES: Interested persons are invited to Abstract: The purpose of this Desk Officer, Department of Education, submit comments on or before January evaluation is to assess the impact, Office of Management and Budget, 725 2, 2001. strengths and weaknesses of the 17th Street, NW., Room 10235, New SUPPLEMENTARY INFORMATION: Section Partnership Grants Program, one of the Executive Office Building, Washington, 3506 of the Paperwork Reduction Act of three programs authorized in Title II of DC 20503 or should be electronically 1995 (44 U.S.C. Chapter 35) requires the Higher Education Amendments of mailed to the internet address l that the Office of Management and 1998. This program is designed primarly Lauren [email protected]. Budget (OMB) provide interested to increase collaboration between SUPPLEMENTARY INFORMATION: Section Federal agencies and the public an early schools of arts and sciences and schools 3506 of the Paperwork Reduction Act of opportunity to comment on information of education, increase the rule of K–12 1995 (44 U.S.C. Chapter 35) requires collection requests. OMB may amend or educators in the design and that the Office of Management and waive the requirement for public implementation of effective teacher Budget (OMB) provide interested consultation to the extent that public education programs, and increase the Federal agencies and the public an early
VerDate 112000 21:27 Oct 30, 2000 Jkt 194001 PO 00000 Frm 00008 Fmt 4703 Sfmt 4703 E:\FR\FM\31OCN1.SGM pfrm02 PsN: 31OCN1 64934 Federal Register / Vol. 65, No. 211 / Tuesday, October 31, 2000 / Notices opportunity to comment on information collection when making your request. Stewardship (EM–51), Office of collection requests. OMB may amend or Comments regarding burden and/or the Environmental Management, U.S. waive the requirement for public collection activity requirements should Department of Energy, P.O. Box 45079, consultation to the extent that public be directed to Kathy Axt at her internet Washington, D.C. 20026–5079, phone: participation in the approval process address [email protected]. 202–586–9280; or submitted would defeat the purpose of the Individuals who use a electronically to: information collection, violate State or telecommunications device for the deaf [email protected]; or Federal law, or substantially interfere (TDD) may call the Federal Information submitted by fax to: 202–863–7036. with any agency’s ability to perform its Relay Service (FIRS) at 1–800–877– Copies of the Draft Study can be statutory obligations. The Leader, 8339. requested by telephone at 1–800–736– Regulatory Information Management [FR Doc. 00–27876 Filed 10–30–00; 8:45 am] 3282 (‘‘1–800–7EM–DATA’’). The Draft Group, Office of the Chief Information Study and its supporting technical BILLING CODE 4000±01±P Officer, publishes that notice containing documents also are available for review proposed information collection at www.em.doe.gov/lts and at the DOE requests prior to submission of these Reading Room addresses referenced in DEPARTMENT OF ENERGY requests to OMB. Each proposed the ‘‘Availability of the Draft Study and information collection, grouped by Draft Long-Term Stewardship Study Related Information’’ section of this office, contains the following: (1) Type notice. of review requested, e.g. new, revision, AGENCY: Department of Energy (DOE). SUPPLEMENTARY INFORMATION: extension, existing or reinstatement; (2) ACTION: Notice of availability, Title; (3) Summary of the collection; (4) opportunity to comment and public Background Description of the need for, and hearing. DOE has prepared the Draft Study on proposed use of, the information; (5) the possible consequences of long-term SUMMARY: The Department of Energy Respondents and frequency of stewardship according to the terms of a collection; and (6) Reporting and/or (DOE) announces the release of the Draft Long-Term Stewardship Study (Draft 1998 settlement agreement that resolved Recordkeeping burden. OMB invites a lawsuit brought against DOE by the public comment. Study) for public review, comment and public hearing. This Draft Study has Natural Resources Defense Council and Dated: October 26, 2000. been prepared in accordance with the 38 other plaintiffs [Natural Resources John Tressler, terms of a 1998 Settlement Agreement Defense Council, et al. v. Richardson, et Leader Regulatory Information Management, that resolved a lawsuit brought against al., Civ. No. 97–936 (SS) (D.D.C. Dec. Office of the Chief Information Officer. DOE by the Natural Resources Defense 12, 1998)]. The Draft Study incorporates input received during a public scoping Office of Educational Research and Council (NRDC) and other plaintiffs. process and examines the institutional Improvement The Draft Study examines the and programmatic issues currently Type of Review: Reinstatement. institutional and programmatic issues facing DOE as it completes the facing DOE as it completes the Title: Public Libraries Survey. environmental cleanup program at its Frequency: Annually. environmental cleanup program at its sites. In keeping with the requirement sites. Long-term stewardship, under the Affected Public: State, Local, or Tribal agreement, refers to: Gov’t, SEAs or LEAs; Federal that the Draft Study meet certain DOE The physical controls, institutions, Government. requirements for public review in 10 CFR 1021.313, made applicable under information and other mechanisms needed to Reporting and Recordkeeping Hour ensure protection of people and the Burden: the terms of the Settlement Agreement, DOE invites the general public, other environment at sites where DOE has Responses: 56. completed or plans to complete ‘‘cleanup’’ Burden Hours: 1,680. Federal agencies, Native American (e.g., landfill closures, remedial actions, Abstract: The Public Libraries Survey Tribes, state and local governments, and removal actions, and facility stabilization). is an annual survey of public libraries all other interested parties to comment This concept of long-term stewardship in the 50 States, D.C. and the Outlying on the Draft Study. The purpose of the includes, inter alia, land-use controls, Areas. Data for local public libraries are public hearing is to receive oral and monitoring, maintenance, and information management. aggregated at the State and national written comments on the Draft Study. DATES: The public comment period will levels. Federal, state, and local officials Study Goal and Approach use the data for planning, evaluation, extend to December 15, 2000. monitoring, budgeting, administration, Comments received after that date will The goal of the Draft Study is to and policy. Other users include be considered to the extent practicable. inform decision-makers and the public librarians, educators, and researchers. The public hearing will be held about the long-term stewardship issues The respondents are the 50 States, D.C. Thursday, November 30, 2000, from 9 and challenges facing DOE and potential and the Outlying Areas. am to 1 pm. Submit written notices of options for addressing such issues. Requests for copies of the proposed participation by November 20, 2000. The Draft Study does: information collection request may be ADDRESSES: The public hearing will be • Describe DOE’s long-term accessed from http://edicsweb.ed.gov, or held at the U.S. Department of Energy, stewardship responsibilities, the status should be addressed to Vivian Reese, Forrestal Building, 1000 Independence of current and ongoing stewardship Department of Education, 400 Maryland Ave SW, Washington, D.C., Room obligations, activities and initiatives, Avenue, SW, Room 4050, Regional 1E245. and the plans for future activities; Office Building 3, Washington, DC Submit written notices of • Analyze the national issues that 20202–4651. Requests may also be participation in the public hearing, DOE needs to address in planning for electronically mailed to the internet requests for information about the Draft and conducting long-term stewardship address [email protected] or Study and written comments on the activities; and faxed to 202–708–9346. Please specify Draft Study to Steven Livingstone, • Promote information exchange on the complete title of the information Project Manager, Office of Long-Term long-term stewardship among DOE,
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Tribal nations, state and local data set used to develop the 1998 London County, Connecticut, to make governments, and private citizens. Accelerating Cleanup: Paths to Closure natural gas deliveries to Phelps Dodge The Draft Study does not: report. DOE used this information to Copper Products Company (Phelps • Serve as a National Environmental identify sites where contaminated Dodge), an industrial end user near Policy Act (NEPA) document or its facilities, water, soil, and/or engineered Norwich, Connecticut. functional equivalent; units would likely remain after cleanup Algonquin requests this authorization • Identify or address site-specific is complete to estimate the scope of pursuant to its blanket facilities issues, except as examples in the long-term stewardship activities. Both certificate of public convenience and context of presenting national issues; or necessity, as more fully set forth in the • the Draft Study on long-term Address issues specific to nuclear stewardship and the background application which is on file with the stockpile stewardship, other activities document are the best available Commission and open to public related to national security, or the information sources to date on the issue inspection. This application may be Central Internet Database required by of DOE’s long-term stewardship viewed on the Internet at http:// the settlement agreement. responsibilities. Copies of the Draft www.ferc.fed.us/online/rims.htm (call Study Development Process Study and the background document or 202–208–2222 for0 assistance). The other related information can be name, address, and telephone number of The terms of the settlement agreement the applicant’s representative, to whom stipulate that DOE follow the obtained by contacting: • The Internet Web Site at correspondence and communications President’s Council on Environmental concerning this application should be Quality (CEQ) procedures for public www.em.doe.gov/lts, which contains information on long-term stewardship addressed is: Steven E. Tillman, scoping, 40 CFR 1501.7(a)(1)–(2) for this Director of Regulatory Affairs, study, even though it is not a NEPA related issues produced by DOE and outside sources. Algonquin Gas Transmission Company, document or its functional equivalent. • P.O. Box 1642 Houston, Texas 77251– Therefore, DOE conducted a scoping The Center for Environmental Management Information, 955 L’Enfant 1642, (713) 627–5113 (Phone) or (713) process during October 1999—February 627–5947 (Fax). 2000 to gather comments on the scope Plaza, North, SW, Suite 8200, Washington, D.C. 20024, 1–800–736– Algonquin proposes to construct and of the Draft Study. The scoping period install dual 6-inch tap valves, 6-inch was initially intended to run from 3282 (‘‘1–800–7EM–DATA’’). • DOE Reading Rooms (for locations check values and 6-inch insulating October 1999 to January 2000, but was flanges near Mile Post 17.0 of its extended by request to February 2000. of the DOE Reading Rooms or other public information repositories existing E–1L 12-inch Lateral and the E– The scoping process provided DOE with 1 6-inch Lateral in New London County, input about the topics and issues that containing background information, please contact the Center for including all piping between such tap should be included in the Draft Study, valves, check valves and insulating Environmental Management within the general parameters flanges or above ground riser piping. Information at the above address and established by the settlement agreement. The short spur lateral from the above telephone). DOE developed the overall scope and delivery tap to the Phelps Dodge plant issues that are addressed in the Draft Issued in Washington D.C., October 24, would be located between the Yantic Study based on comments received 2000. River and Otrobando Avenue and will through the scoping process, ongoing James D. Werner, consist of about 1,565 feet of buried 6- work on long-term stewardship being Director, Office of Long-Term Stewardship, inch pipe and an electric gas conducted by DOE and non-DOE Office of Environmental Management. measurement meter station at the plant. organizations, and requirements of the [FR Doc. 00–27902 Filed 10–31–00; 8:45 am] Algonquin says that Phelps Dodge will settlement agreement. DOE is soliciting BILLING CODE 6450±01±U reimburse Algonquin for 100% of the comments on the Draft Study during a projects cost, abut $1,450,000. public comment period that begins on Algonquin says that the related the date of publication of this notice and DEPARTMENT OF ENERGY transportation service for Phelps Dodge ends on December 15, 2000. Similarly, of up to 3,800 Dth per day will be a public hearing will be held to receive Federal Energy Regulatory rendered pursuant to Algonquin’s open oral and written comments from the Commission access rate schedules. Further, public on the Draft Study. Comments [Docket No. CP01±17±00] Algonquin says that the transportation received during the public comment service for Phelps Dodge will be period will be used by DOE to complete Algonquin Gas Transmission performed using existing capacity on the final study. DOE’s responses to Company; Notice of Request Under Algonquin submits that its proposal will comments received during the public Blanket Authorization be accomplished without detriment or comment period will be presented in a disadvantage to its other customers. public comment summary document to October 25, 2000. Any person or the Commission’s staff be issued as part of the final study. Take notice that on October 18, 2000 may, within 45 days after issuance of Algonquin Gas Transmission Company the this notice by the Commission, file Availability of the Draft Study and (Algonquin), 5400 Westheimer Court, pursuant to Rule 214 of the Related Information Houston, Texas 77056–5310, filed in Commission’s Procedural Rules (18 CFR DOE released a background Docket No. CP01–17–000, a request 385.214) a motion to intervene or notice document, From Cleanup to pursuant to § 157.205 and 157.211 of the of intervention and, pursuant to Section Stewardship, a Companion Report to Commission’s regulations under the 157.205 of the Regulations under the ‘‘Paths to Closure’’ and Background Natural Gas Act (18 CFR 157.205 and Natural Gas Act (18 CFR 157.205), a Information to Support the Scoping 175.211). Algonquin requests protest to the request. If no protest is Process Required for the 1998 PEIS authorization to install, own, operate filed within the time allowed therefore, Settlement Study in October 1999. In and maintain a new point of delivery the proposed activity shall be deemed to producing the background document and short spur lateral along its existing be authorized effective the day after the and the Draft Study, DOE used the same 6-inch and 12-inch laterals in New time allowed for filing a protest. If a
VerDate 112000 21:27 Oct 30, 2000 Jkt 194001 PO 00000 Frm 00010 Fmt 4703 Sfmt 4703 E:\FR\FM\31OCN1.SGM pfrm02 PsN: 31OCN1 64936 Federal Register / Vol. 65, No. 211 / Tuesday, October 31, 2000 / Notices protest is filed and not withdrawn filed electronically via the internet in DEPARTMENT OF ENERGY within 30 days after the time allowed lieu of paper. See 18 CFR filing a protest, this request shall be 385.2001(a)(1)(iii) and the instructions Federal Energy Regulatory treated as an application for on the Commission’s web site at Commission authorization pursuant to Section 7 of http://www.ferc.fed.us/efi/doorbell.htm. [Docket Nos. ER00±3068±000 and ER00± the Natural Gas Act. Beginning David P. Boergers, 3068±001] November 1, 2000, comments and protests may be filed electronically via Secretary. FPL Energy Cape, LLC; Notice of the Internet in lieu of paper. See, 18 [FR Doc. 00–27854 Filed 10–30–00; 8:45 am] Issuance of Order CFR 385.2001(a)(1)(iii) and the BILLING CODE 6717±01±M instructions on the Commission’s web October 25, 2000. site; http://www.ferc.fed.us/efi/ FPL Energy Cape, LLC (FPL Energy doorbell.htm. DEPARTMENT OF ENERGY Cape) submitted for filing a rate schedule under which FPL Energy Cape David P. Boergers, Federal Energy Regulatory will engage in wholesale electric power Secretary. Commission and energy transactions at market-based [FR Doc. 00–27848 Filed 10–30–00; 8:45 am] [Docket No. RP01±59±000] rates. FPL Energy Cape also requested BILLING CODE 6717±01±M waiver of various Commission El Paso Natural Gas Company; Notice regulations. In particular, FPL Energy of Proposed Changes in FERC Gas Cape requested that the Commission DEPARTMENT OF ENERGY Tariff grant blankets approval under 18 CFR Part 34 of all future issuances of Federal Energy Regulatory October 25, 2000. securities and assumptions of liability Commission Take notice that on October 20, 2000, bye FPL Energy Cape. El Paso Natural Gas Company (El Paso) [Docket No. RP00±372±001] On October 18, 2000, pursuant to tendered for filing as part of its FERC delegated authority, the Director, ANR Pipeline Company; Notice of Gas Tariff, Second Revised Volume No. Division of Corporate Applications, Compliance Filing 1–A, Third Revised Sheet No. 293, with Office of Markets, Tariffs and Rates, an effective date of November 20, 2000. granted requests for blanket approval October 25, 2000. El Paso states that it is also filing a under Part 34, subject to the following: Take notice that on October 19, 2000, revised Statement on Standards of Within thirty days of the date of the ANR Pipeline Company (ANR) tendered Conduct. El Paso states that this filing order, any person desiring to be heard for filing in compliance with the updates El Paso’s Standards of Conduct or to protest the blanket approval of Commission’s order dated September and related tariff sheet. issuances of securities or assumptions of 29, 2000 at Docket No. RP00–372–000, Any person desiring to be heard or to liability by FPL Energy Cape should file a revised allocation of interest costs. protest said filing should file a motion a motion to intervene or protest with the On June 30, 2000 ANR Pipeline to intervene or a protest with the Federal Energy Regulatory Commission, Company (ANR) filed an Interest Federal Energy Regulatory Commission, 888 First Street, N.E., Washington, D.C. Recovery Plan to direct bill certain 888 First Street, NE., Washington, DC 20426, in accordance with Rules 211 shippers for interest charges paid by 20426, in accordance with Section and 214 of the Commission’s Rules of ANR to Great Lakes Gas Transmission 385.214 or 385.211 of the Commission’s Practice and Procedure (18 CFR 385.211 L.P. (Great Lakes). The order required Rules and Regulations. All such motions and 385.214). ANR to allocate, but not direct bill, costs or protests must be filed in accordance Absent a request for hearing within to all discount shippers, unless such with Section 154.210 of the this period, FPL Energy Cape is discount shippers are subject to Commission’s Regulations. Protests will authorized to issue securities and additional charges. be considered by the Commission in assume obligations or liabilities as a Any person desiring to protest said determining the appropriate action to be guarantor, indorser, surety, or otherwise filing should file a protest with the taken, but will not serve to make in respect of any security of another Federal Energy Regulatory Commission, protestants parties to the proceedings. person; provided that such issuance or 888 First Street, NE., Washington, DC Any person wishing to become a party assumption is for some lawful object 20426, in accordance with Section must file a motion to intervene. Copies within the corporate purposes of the 385.211 of the Commission’s Rules and of this filing are on file with the applicant, and compatible with the Regulations. All such protests must be Commission and are available for public public interest, and is reasonably filed on or before November 1, 2000. inspection in the Public Reference necessary or appropriate for such Protests will be considered by the Room. This filing may be viewed on the purposes. Commission in determining the web at http://www.ferc.fed.us/online/ The Commission reserves the right to appropriate action to be taken, but will rims.htm (call 202–208–2222 for require a further showing that neither not be considered by the Commission in assistance). Beginning November 1, public nor private interests will be determining the appropriate action to be 2000, comments and protests may be adversely affected by continued taken, but will not serve to make filed electronically via the internet in approval of FPL Energy Cape’s protestants parties to the proceedings. lieu of paper. See, 18 CFR issuances of securities or assumptions of Copies of this filing are on file with the 385.2001(a)(1)(iii) and the instructions liability. Commission and are available for public on the Commission’s web site at http: Notice is hereby given that the inspection in the Public Reference //www.ferc.fed.us/efi/doorbell.htm. deadline for filing motions to intervene Room. This filing may be viewed on the or protests as set forth above, is web at http://www.ferc.fed.us/online/ David P. Boergers, November 17, 2000. rims.htm (call 202–208–2222 for Secretary. Copies of the full text of the Order are assistance). Beginning November 1, [FR Doc. 00–27856 Filed 10–30–00; 8:45 am] available from the Commission’s Public 2000, comments and protests may be BILLING CODE 6717±01±M Reference Branch, 888 First Street, N.E.,
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Washington, D.C. 20426. The Order may DEPARTMENT OF ENERGY DEPARTMENT OF ENERGY also be viewed on the Internet at http: //www.ferc.fed.us/online/rims.htm (call Federal Energy Regulatory Federal Energy Regulatory Commission 202–208–2222 for assistance). Commission
David P. Boergers, [Docket No. RT01±67±000] [Docket No. RP01±60±000] Secretary. [FR Doc. 00–27899 Filed 10–30–00; 8:45 am] GridFlorida LLC, Florida Power & Light Natural Gas Pipeline Company of BILLING CODE 6717±01±M Co., Florida Power Corporation, and America; Notice of Proposed Changes Tampa Electric Co.; Supplemental in FERC Gas Tariff Notice of Filing DEPARTMENT OF ENERGY October 25, 2000. October 25, 2000. Take notice that on October 20, 2000, Federal Energy Regulatory Take notice that on October 16, 2000, Natural Gas Pipeline Company of Commission Florida Power & Light Company, Florida America (Natural) tendered for filing to Power Corporation, and Tampa Electric be part of its FERC Gas Tariff, Sixth [Docket No. RP01±58±000] Company (collectively, the Applicants), Revised Volume No. 1, the tariff sheets pursuant to Sections 203 and 205 of the listed on Appendix A to the filing, to be Granite State Gas Transmission, Inc.; Federal Power Act, jointly filed their effective November 20, 2000. Notice of Compliance Filing Order No. 2000 compliance filing Natural states that these sheets were providing for the creation of a Regional October 25, 2000. filed is to make several minor revisions Transmission Organization (RTO). In a to its Tariff, including changes to the Take notice that on October 18, 2000, Notice of Filng issued October 20, 2000, General Terms and Conditions and to Granite State Gas Transmission, Inc. the date for interventions, comments, Natural’s Rate Schedules IBS, FFTS, (Granite State) tendered for filing a letter and protests with respect to that filing FRSS, NSS and DSS. These changes was established as November 20, 2000. with the Commission in response to correct several provisions of Natural’s Order No. 587–L informing the The Applicants have requested, to Tariff and clarify others, conform Commission that Granite State’s facilitate the continuing collaborative various provisions of Natural’s Tariff to currently effective gas tariff contains process, that interested parties be each other or incorporate current provisions permitting imbalance netting permitted additional time to submit Commission policy. their comments on the portion of their and trading by shippers. Natural requests waiver of the Application for which an additional Granite States states that copies of this Commission’s Regulations to the extent filing will be make on December 15, filing have been sent to Granite State’s necessary to permit the tariff sheets 2000. shippers and interested state regulatory submitted to become effective commissions. Accordingly, any person desiring to November 20, 2000. be heard or to protest should file a Any person desiring to be heard or to Natural states that copies of the filing motion to intervene, comments, or have been mailed to its customers and protest said filing should file a motion protests with the Federal Energy interested state regulatory agencies. to intervene or a protest with the Regulatory Commission, 888 First Federal Energy Regulatory Commission, Street, N.W., Washington, D.C. 20426, in Any person desiring to be heard or to 888 First Street, NE., Washington, DC accordance with Rules 211 and 214 of protest said filing should file a motion 20426, in accordance with Sections the Commission’s Rules of Practice and to intervene or a protest with the 385.214 and 385.211 of the Procedure (18 CFR 385.211 and Federal Energy Regulatory Commission, Commission’s Rules and Regulations. 385.214). All such motions, comments 888 First Street, N.E., Washington, D.C. All such motions or protests must be and protests with respect to the matters 20426, in accordance with Sections filed in accordance with Section for which Applicants have requested 385.214 or 385.211 of the Commission’s 154.210 of the Commission’s expedited treatment should be filed on Rules and Regulations. All such motions Regulations. Protests will be considered or before November 20, 2000. All such or protests must be filed in accordance by the Commission in determining the motions, comments and protests with with Section 154.210 of the appropriate action to be taken, but will respect to the matters for which Commission’s Regulations. Protests will not serve to make protestants parties to Applicants have not requested be considered by the Commission in the proceedings. Any person wishing to expedited treatment will be due within determining the appropriate action to be become a party must file a motion to 30 days from the date Applicants make taken, but will not serve to make intervene. Copies of this filing are on their additional filing implementing protestants parties to the proceedings. file with the Commission and are details of their RTO proposal. Beginning Any person wishing to become a party available for public inspection in the November 1, 2000, comments and must file a motion to intervene. Copies Public Reference Room. This filing may protests may be filed electronically via of this filing are on file with the be viewed on the web at http:// the internet in lieu of paper. See, 18 Commission and are available for public www.ferc.fed.us/online/rims.htm (call CFR 385.2001(a)(1)(iii) and the inspection in the Public Reference 202–208–2222 for assistance). instructions on the Commission’s web Room. This filing may be viewed on the site at http;//www.ferc.fed.us/efi/ web at http;//www.ferc.fed.us/efi/ David P. Boergers, doorbell.htm. doorbell.htm. Secretary. David P. Boergers, David P. Boergers, [FR Doc. 00–27855 Filed 10–30–00; 8:45 am] Secretary. Secretary. BILLING CODE 6717±01±M [FR Doc. 00–27858 Filed 10–30–00; 8:45 am] [FR Doc. 00–27857 Filed 10–30–00; 8:45 am] BILLING CODE 6717±01±M BILLING CODE 6717±01±M
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DEPARTMENT OF ENERGY //www.ferc.fed.us/online/rims.htm (call rims.htm (call 202–208–2222 for 202–208–2222 for assistance. assistance). Federal Energy Regulatory Commission David P. Boergers, David P. Boergers, Secretary. Secretary. [Docket No. ER00±3637±000] [FR Doc. 00–27898 Filed 10–30–00; 8:45 am] [FR Doc. 00–27850 Filed 10–30–00; 8:45 am] Nicole Energy Marketing of Illinois, BILLING CODE 6717±01±M BILLING CODE 6717±01±M Inc.; Notice of Issuance of Order
October 25, 2000. DEPARTMENT OF ENERGY DEPARTMENT OF ENERGY Nicole Energy Marketing of Illinois, Inc. (Nicole Energy) submitted for filing Federal Energy Regulatory Federal Energy Regulatory a rate schedule under which Nicole Commission Commission Energy will engage in wholesale electric power and energy transactions at [Docket No. GT01±2±000] [Docket No. RP96±312±033] market-based rates. Nicole Energy also requested waiver of various Commission Northwest Pipeline Corporation; Notice Tennessee Gas Pipeline Company; regulations. In particular, Nicole Energy of Proposed Changes in FERC Gas Notice of Negotiated Rate Filing requested that the Commission grant Tariff and Filing of Non-Conforming blanket approval under 18 CFR Part 34 Service Agreements October 25, 2000. of all future issuances of securities and Take notice that on October 19, 2000, assumptions of liability by Nicole October 25, 2000. Tennessee Gas Pipeline Company Energy. On October 18, 2000, pursuant to Take notice that on October 19, 2000, (Tennessee), tendered for filing and delegated authority, the Director, Northwest Pipeline Corporation approval two Gas Transportation Division of Corporate Applications, (Northwest) tendered for filing and Agreements between Tennessee and Office of Markets, Tariffs and Rates, acceptance three Rate Schedule TF–1 Dynegy Energy Marketing and Trade granted requests for blanket approval non-conforming service agreements. (Dynegy) pursuant to Tennessee’s Rate under Part 34, subject to the following: Northwest also tendered the following Schedule FT–A (FT–A Service Within thirty days of the date of the tariff sheets as part of its FERC Gas Agreements) and a copy of an October order, any person desiring to be heard Tariff, Third Revised Volume No. 1, to 18, 2000 Firm Transportation or to protest the blanket approval of be effective November 19, 2000: Negotiated Rate Agreement entered into issuances of securities or assumptions of Seventh Revised Sheet No. 364 between Tennessee and Dynegy liability by Nicole Energy should file a Fifth Revised Sheet No. 365 (Negotiated Rate Agreement). The filed motion to intervene or protest with the First Revised Sheet No. 366 FT–A Service Agreements and the Federal Energy Regulatory Commission, Negotiated Agreement reflects a 888 First Street, NE., Washington, DC Northwest stats that the service negotiated rate arrangement between 20426, in accordance with Rules 211 agreements each contain a provision Tennessee and Dynegy to be effective and 214 of the Commission’s Rules of imposing a subordinate scheduling November 1, 2000 through October 31, Practice and Procedure (18 CFR 385.211 priority and that the tariff sheets are 2001. and 385.214). submitted to add such agreements to the Absent a request for hearing within Any person desiring to be heard or to list of non-conforming service protest said filing should file a motion this period, Nicole Energy is authorized agreements contained in Northwest’s to issue securities and assume to intervene or a protest with the tariff. obligations or liabilities as a guarantor, Federal Energy Regulatory Commission, indorser, surety, or otherwise in respect Any person desiring to be heard or to 888 First Street, NE., Washington, DC of any security of another person; protest said filing should file a motion 20426, in accordance with Sections provided that such issuance or to intervene or a protest with the 385.214 or 385.211 of the Commission’s assumption is for some lawful object Federal Energy Regulatory Commission, Rules and Regulations. All such motions within the corporate purposes of the 888 First Street, NE., Washington, DC or protests must be filed in accordance applicant, and compatible with the 20426, in accordance with Sections by the Commission in determining the public interest, and is reasonably 385.214 or 385.211 of the Commission’s appropriate action to be taken, but will necessary or appropriate for such Rules and Regulations. All such motions not serve to make protestants parties to purposes. or protests must be filed in accordance the proceedings. Any person wishing to The Commission reserves the right to with Section 154.210 of the become a party must file a motion to require a further showing that neither Commission’s Regulations. Protests will intervene. Copies of this filing are on public nor private interests will be be considered by the Commission in file with the Commission and are adversely affected by continued determining the appropriate action to be available for public inspection in the approval of Nicole Energy’s issuances of taken, but will not serve to make Public Reference Room. This filing may securities or assumptions of liability. protestants parties to the proceedings. Notice is hereby given that the be viewed on the web at http:// deadline for filing motions to intervene Any person wishing to become a party www.ferc.fed.us/online/rims.htm (call or protests, as set forth above, is must file a motion to intervene. Copies 202–208–2222 for assistance). of this filing are on file with the November 17, 2000. David P. Boergers, Copies of the full text of the Order are Commission and are available for public available from the Commission’s Public inspection in the Public Reference Secretary. Reference Branch, 888 First Street, NE., Room. This filing may be viewed on the [FR Doc. 00–27853 Filed 10–30–00; 8:45 am] Washington, DC 20426. The Order may web at http://www.ferc.fed.us/online/ BILLING CODE 6717±01±M also be viewed on the Internet at http:
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DEPARTMENT OF ENERGY of comments to those that concern the 7. Xcel Energy Services, Inc. adequacy or accuracy of the application. Federal Energy Regulatory [Docket No. ER00–3438–001] Commission 4. Oklahoma Gas and Electric Company Take notice that on October 16, 2000, and OGE Energy Resources, Inc. Xcel Energy Services, Inc. (XES), on [Docket No. ES01±5±000, et al.] [Docket Nos. ER98–511–001] and [ER97– behalf of Public Service Company of Colorado (Public Service), tendered for Kentucky Utilities Company, et al.; 4345–013] filing a corrected Master Power Electric Rate and Corporate Regulation Take notice that on October 17, 2000, Purchase and Sale Agreement between Filings Oklahoma Gas and Electric Company and OGE Energy Resources, Inc. (OGE Public Service and Sandia Resources October 24, 2000. Companies) collectively tendered for Corporation which is an umbrella Take notice that the following filings filing an updated market analysis as service agreement under Public have been made with the Commission: required by the Commission’s orders Service’s Rate Schedule for Market- approving market based rates for each of Based Power Sales (Public Service FERC 1. Kentucky Utilities Company the OGE Companies. Electric Tariff, Original Volume No. 6). [Docket No. ES01–5–000] Comment date: November 7, 2000, in XES requests that this agreement Take notice that on October 16, 2000, accordance with Standard Paragraph E become effective on August 1, 2000. Kentucky Utilities Company submitted at the end of this notice. This filing is made in compliance with FERC Order dated September 29, 2000 an application pursuant to section 204 5. Allegheny Energy Service in Docket No. ER00–3438–000 and of the Federal Power Act seeking Corporation, on behalf of Monongahela FERC Order No. 614. authorization to issue short-term debt in Power Company, The Potomac Edison an amount not to exceed $400 million Company and West Penn Power Comment date: November 6, 2000, in on or before November 30, 2002 with a Company (Allegheny Power) accordance with Standard Paragraph E final maturity no later than November at the end of this notice. [Docket No. ER96–58–005] 30, 2003. 8. Energetix, Inc. Comment date: November 10, 2000, in Take notice that on October 17, 2000, accordance with Standard Paragraph E Allegheny Energy Service Corporation [Docket Nos. ER97–3556–011] at the end of this notice. on behalf of Monongahela Power Take notice that on October 17, 2000, Company, The Potomac Edison in compliance with the Commission’s 2. Louisville Gas and Electric Company Company and West Penn Power order issued September 12, 1997 in the [Docket No. ES01–6–000] Company (Allegheny Power) tendered above-referenced proceeding, Rochester for filing revisions to its Open Access Take notice that on October 16, 2000, Gas and Electric Corporation, 80 FERC Transmission Tariff in compliance with Louisville Gas and Electric Company ¶ 61,284 (1997), Energetix, Inc. the Commission’s Order of October 2, (Energetix), tendered for filing with the submitted an application pursuant to 2000 at Docket Nos. ER96–58–003 and section 204 of the Federal Power Act Commission an update to the market ER99–237–002, 93 FERC ¶ 61,005. power study originally submitted in seeking authorization to issue short- Copies of the filing have been term debt in an amount not to exceed support of Energetix’s request for provided to Allegheny Power’s market-based rate authority. $400 million on or before November 30, jurisdictional customers, those parties Comment date: November 7, 2000, in 2002 with a final maturity no later than contained within the official service accordance with Standard Paragraph E November 30, 2003. lists of the Federal Energy Regulatory at the end of this notice. Comment date: November 10, 2000, in Commission for Docket Nos. ER96–58– accordance with Standard Paragraph E 003 and ER99–237–002, the Public 9. Citizens Communications Company at the end of this notice. Utilities Commission of Ohio, the [Docket No. ER00–3211–000] Pennsylvania Public Utility 3. Sithe Tamuin Energy Services II, S. Take notice that on October 19, 2000, de R.L. de C.V. Commission, the Maryland Public Service Commission, the Virginia State Citizens Communications Company, [Docket No. EG01–8–000] Corporation Commission and the West tendered for filing Notice that effective Take notice that on October 20, 2000 Virginia Public Service Commission. September 28, 2000, Citizens Utilities Sithe Tamuin Energy Services II, S. de Comment date: November 7, 2000, in Company changed its name to Citizens R.L. de C.V. (Applicant), c/o Sithe accordance with Standard Paragraph E Communications Company. Energies, Inc., 335 Madison Avenue, at the end of this notice. Comment date: November 9, 2000, in 28th Floor, New York, NY 10017 filed accordance with Standard Paragraph E with the Federal Energy Regulatory 6. Illinois Power Company at the end of this notice. Commission an application for [Docket No. ER00–3334–001] 10. Consumers Energy Company determination of exempt wholesale Take notice that on October 16, 2000, generator status pursuant to Part 365 of Illinois Power Company (Illinois [Docket No. ER00–3559–001] the Commission’s regulations. Power), 500 South 27th Street, Decatur, Take notice that on October 16, 2000, Applicant is a company organized Illinois 62521, tendered for filing in Consumers Energy Company under the laws of Delaware, and will be compliance with the Commission’s (Consumers), tendered for filing a engaged in the operation of a nominally letter order issued September 14, 2000, designated version of Consumers Energy rated 260 MW circulating fluidized bed in this proceeding, a complete, revised Company Electric Rate Schedule FERC petroleum coke power plant and Service Agreement with a new No. 44 as provided for in Order No. 614, auxiliary facilities located in Tamuin, designation as required in Order No. pursuant to the October 5, 2000 letter San Luis Potosi, Mexico. 614, FERC Stats. & Regs. ¶ 31.096 order in this docket. Comment date: November 14, 2000, in (2000). Copies of the filing were served upon accordance with Standard Paragraph E Comment date: November 6, 2000, in Northern, the Michigan Public Service at the end of this notice. The accordance with Standard Paragraph E Commission and the Indiana Utility Commission will limit its consideration at the end of this notice. Regulatory Commission.
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Comment date: November 6, 2000, in Dominion Virginia Power requests an GPU Energy requests that cancellation accordance with Standard Paragraph E effective date of October 19, 2000, the be effective December 18, 2000. at the end of this notice. date of filing of the Service Agreement. Comment date: November 9, 2000, in Copies of the filing were served upon accordance with Standard Paragraph E 11. PECO Energy Company PECO Energy Company, the Virginia at the end of this notice. [Docket No. ER01–127–000] State Corporation Commission, and the 17. Jersey Central Power & Light North Carolina Utilities Commission. Take notice that on October 16, 2000, Company, Metropolitan Edison Comment date: November 9, 2000, in PECO Energy Company (PECO), Company and Pennsylvania Electric accordance with Standard Paragraph E tendered for filing under Section 205 of Company the Federal Power Act, 16 U.S.C. S 792 at the end of this notice. [Docket No. ER01–163–000] et seq., a Service Agreement dated 14. Consolidated Edison Company of October 5, 2000 with Smartenergy.com New York, Inc. Take notice that on October 19, 2000, (SMC) under PECO’s FERC Electric Jersey Central Power & Light Company, Tariff Original Volume No. 1 (Tariff). [Docket No. ER01–160–000] Metropolitan Edison Company and PECO requests an effective date of Take notice that on October 19, 2000, Pennsylvania Electric Company November 1, 2000 for the Agreement. Consolidated Edison Company of New (individually doing business as GPU PECO states that copies of this filing York, Inc. (Con Edison), tendered for Energy), tendered for filing a Notice of have been supplied to Smartenergy.com filing a Supplement to its Rate Cancellation of the Service Agreement and to the Pennsylvania Public Utility Schedule, Con Edison Rate Schedule between GPU Service, Inc. and Niagara Commission. FERC No. 129, a facilities agreement Mohawk Power Corporation, FERC Comment date: November 6, 2000, in with Orange and Rockland Utilities, Electric Tariff, Original Volume No. 1, accordance with Standard Paragraph E Inc., (O&R). The Supplement provides Service Agreement No. 69. at the end of this notice. for an increase in the monthly carrying GPU Energy requests that cancellation charges. be effective December 18, 2000. 12. Western Resources, Inc. Con Edison states that a copy of this Comment date: November 9, 2000, in [Docket No. ER01–157–000] filing has been served upon O&R. accordance with Standard Paragraph E Comment date: November 9, 2000, in at the end of this notice. Take notice that on October 19, 2000, accordance with Standard Paragraph E 18. Jersey Central Power & Light Western Resources, Inc. (WR), tendered at the end of this notice. for filing a Service Agreement between Company, Metropolitan Edison WR and Strategic Energy LLP 15. Consolidated Edison Company of Company and Pennsylvania Electric (Strategic). WR states that the purpose of New York, Inc. Company this agreement is to permit Strategic to [Docket No. ER01–161–000] [Docket No. ER01–164–000] take service under WR’’ Market Based Take notice that on October 19, 2000, Take notice that on October 19, 2000, Power Sales Tariff on file with the Consolidated Edison Company of New Jersey Central Power & Light Company, Commission. York, Inc. (Con Edison), tendered for Metropolitan Edison Company and This agreement is proposed to be filing a Supplement to its Rate Pennsylvania Electric Company effective November 19, 2000. Schedule, Con Edison Rate Schedule (individually doing business as GPU Copies of the filing were served upon FERC No. 2, a facilities agreement with Energy), tendered for filing a Notice of Strategic Energy LLP and the Kansas Central Hudson Gas and Electric Cancellation of the Service Agreement Corporation Commission. Corporation (CH). The Supplement between GPU Service Corporation and Comment date: November 9, 2000, in provides for a decrease in the monthly Commonwealth Edison Company, FERC accordance with Standard Paragraph E carrying charges. Electric Tariff, Original Volume No. 1, at the end of this notice. Con Edison has requested that this Service Agreement No. 45. 13. Virginia Electric and Power decrease take effect as of October 1, GPU Energy requests that cancellation Company 2000. be effective December 18, 2000. Con Edison states that a copy of this Comment date: November 9, 2000, in [Docket No. ER01–158–000] filing has been served by mail upon CH. accordance with Standard Paragraph E Take notice that on October 19, 2000, Comment date: November 9, 2000, in at the end of this notice. Virginia Electric and Power Company accordance with Standard Paragraph E 19. Jersey Central Power & Light (Dominion Virginia Power or the at the end of this notice. Company, Metropolitan Edison Company), tendered for filing a Service 16. Jersey Central Power & Light Company and Pennsylvania Electric Agreement for Long Term Firm Point-to- Company, Metropolitan Edison Company Point Transmission Service with PECO Company and Pennsylvania Electric Energy Company. This Agreement will [Docket No. ER01–165–000] Company be designated as Service Agreement No. Take notice that on October 19, 2000, 306 under the Company’s FERC Electric [Docket No. ER01–162–000] Jersey Central Power & Light Company, Tariff, Revised Volume No. 5. Take notice that on October 19, 2000, Metropolitan Edison Company and The foregoing Service Agreement is Jersey Central Power & Light Company, Pennsylvania Electric Company tendered for filing under the Open Metropolitan Edison Company and (individually doing business as GPU Access Transmission Tariff to Eligible Pennsylvania Electric Company Energy), tendered for filing Notice of Purchasers effective June 7, 2000. Under (individually doing business as GPU Cancellation of the Service Agreement the tendered Service Agreement, Energy), tendered for filing a Notice of between GPU Service Corporation and Dominion Virginia Power will provide Cancellation of the Service Agreement Coral Power, L.L.C., FERC Electric long term firm point-to-point service to between GPU Service Corporation and Tariff, Original Volume No. 1, Service the Transmission Customer under the KCS Power Marketing, Inc., FERC Agreement No 46. rates, terms and conditions of the Open Electric Tariff, Original Volume No. 1, GPU Energy requests that cancellation Access Transmission Tariff. Service Agreement No. 38. be effective December 18, 2000.
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Comment date: November 9, 2000, in 23. Consumers Energy Company and Federal Energy Regulatory Commission, accordance with Standard Paragraph E CMS Marketing, Services and Trading 888 First Street, NE., Washington, DC at the end of this notice. Company 20426, in accordance with Rules 211 and 214 of the Commission’s Rules of 20. Jersey Central Power & Light [Docket No. ER01–171–000] Practice and Procedure (18 CFR 385.211 Company, Metropolitan Edison Take notice that on October 19, 2000, and 385.214). All such motions or Company and Pennsylvania Electric Consumers Energy Company (CECo) and protests should be filed on or before the Company CMS Marketing, Services and Trading comment date. Protests will be Company (CMS MST), tendered for [Docket No. ER01–166–000] considered by the Commission in filing an application requesting Take notice that on October 19, 2000, determining the appropriate action to be modification of Code of Conduct, Jersey Central Power & Light Company, taken, but will not serve to make modification of CECo’s market-based Metropolitan Edison Company and protestants parties to the proceeding. rate power sales tariff, FERC Electric Pennsylvania Electric Company Any person wishing to become a party Tariff, First Revised Volume No. 8, and (individually doing business as GPU must file a motion to intervene. Copies acceptance of a service agreement. Energy), tendered for filing Notice of of these filings are on file with the Comment date: November 9, 2000, in Cancellation of the Service Agreement Commission and are available for public accordance with Standard Paragraph E between GPU Service Corporation and inspection. This filing may also be at the end of this notice. Morgan Stanley Capital Group, Inc., viewed on the Internet at http:// FERC Electric Tariff, Original Volume 24. Illinois Power Company www.ferc.fed.us/ online/rims.htm (call No. 1, Service Agreement No. 53. [Docket No. ER01–175–000] 202–208–2222 for assistance). Beginning GPU Energy requests that cancellation November 1, 2000, comments and Take notice that on October 18, 2000, be effective December 18, 2000. protests may be filed electronically via Illinois Power Company (IP), 500 South Comment date: November 9, 2000, in the internet in lieu of paper. See, 18 27th Street, Decatur, Illinois 65251– accordance with Standard Paragraph E CFR 385.2001(a)(1)(iii) and the 2200, tendered for filing with the at the end of this notice. instructions on the Commission’s web Commission a Service Agreement for site at http://www.ferc.fed.us/efi/ 21. Jersey Central Power & Light Network Integration Transmission doorbell.htm. Company, Metropolitan Edison Service and a Network Operating Company and Pennsylvania Electric Agreement with Central Illinois Light David P. Boergers, Company Company entered into pursuant to IP’s Secretary. [Docket No. ER01–167–000] Open Access Transmission Tariff. [FR Doc. 00–27897 Filed 10–30–00; 8:45 am] Take notice that on October 19, 2000, IP requests an effective date of BILLING CODE 6717±01±U Jersey Central Power & Light Company, September 18, 2000 for the Agreements Metropolitan Edison Company and and accordingly seeks a waiver of the Pennsylvania Electric Company Commission’s notice requirement. DEPARTMENT OF ENERGY (individually doing business as GPU IP has served a copy of the filing on Energy), tendered for filing Notice of CILCO. Federal Energy Regulatory Cancellation of the Service Agreement Comment date: November 8, 2000, in Commission between GPU Service Corporation and accordance with Standard Paragraph E Baltimore Gas and Electric Company, at the end of this notice. [Docket No. CP01±10±000] FERC Electric Tariff, Original Volume 25. PG Power Sales Twelve, L.L.C. No. 1, Service Agreement No. 31. Williams Gas Pipelines Central, Inc.; GPU Energy requests that cancellation [Docket No. ER01–196–000] Notice of Intent To Prepare an be effective December 18, 2000. Take notice that on October 16, 2000, Environmental Assessment for the Comment date: November 9, 2000, in PG Power Sales Twelve, L.L.C., Proposed Welda/Ottawa Compression accordance with Standard Paragraph E tendered for filing Notice that effective Project and Request for Comments on at the end of this notice. September 28, 2000, CP Power Sales Environmental Issues Four, L.L.C., changed its name to PG 22. Jersey Central Power & Light Power Sales Twelve, L.L.C. October 25, 2000. Company, Metropolitan Edison Comment date: November 6, 2000, in Company and Pennsylvania Electric The staff of the Federal Energy accordance with Standard Paragraph E Company Regulatory Commission (FERC or at the end of this notice. Commission) will prepare an [Docket No. ER01–170–000] 26. PG Power Sales Eleven, L.L.C. environmental assessment (EA) that will Take notice that on October 19, 2000, discuss the environmental impacts of Jersey Central Power & Light Company, [Docket No. ER01–197–000] the Welda/Ottawa Compression Project Metropolitan Edison Company and Take notice that on October 16, 2000, involving construction, operation, and Pennsylvania Electric Company PG Power Sales Eleven, L.L.C., tendered abandonment of facilities proposed by (individually doing business as GPU for filing Notice that effective September Williams Gas Pipelines Central, Inc. Energy), tendered for filing Notice of 28, 2000, CP Power Sales Eleven, L.L.C., (Williams) in Anderson and Franklin Cancellation of the Service Agreement changed its name to PG Power Sales Counties, Kansas.1 Williams proposes to between GPU Service Corporation and Eleven, L.L.C. install 6,107 horsepower (hp) of LG&E Power Marketing Inc., FERC Comment date: November 6, 2000, in compression and abandon 7,000 hp of Electric Tariff, Original Volume No. 1, accordance with Standard Paragraph E compression. This EA will be used by Service Agreement No. 8. at the end of this notice. the Commission in its decision-making GPU Energy requests that cancellation process to determine whether the be effective December 18, 2000. Standard Paragraphs Comment date: November 9, 2000, in E. Any person desiring to be heard or 1 Williams’ application was filed with the accordance with Standard Paragraph E to protest such filing should file a Commission under Section 7 of the Natural Gas Act at the end of this notice. motion to intervene or protest with the and Part 157 of the Commission’s regulations.
VerDate 112000 19:49 Oct 30, 2000 Jkt 194001 PO 00000 Frm 00016 Fmt 4703 Sfmt 4703 E:\FR\FM\31OCN1.SGM pfrm02 PsN: 31OCN1 64942 Federal Register / Vol. 65, No. 211 / Tuesday, October 31, 2000 / Notices project is in the public convenience and it would also construct station piping, the comments received during the necessity. headers and other appurtenant facilities scoping process, the EA may be If you are a landowner receiving this to tie the three existing turbines into the published and mailed to Federal, state, notice, you should have been contacted five existing reciprocating compressors and local agencies, public interest by Williams if you reside within 1⁄2 mile at the Welda Compressor Station in groups, interested individuals, affected of the compressor stations. Also, you order to utilize these reciprocating landowners, newspapers, libraries, and may be contacted by a pipeline compressors as second stage the Commission’s official service list for company representative about the compression during periods of peak this proceeding. A comment period will acquisition of an easement to construct withdrawal. This would provide be allotted for review if the EA is an access road near the north property Williams the flexibility of operating the published. We will consider all line of the Welda compressor Station. Ottawa-Welda 20-inch-diameter comments on the EA before we make The pipeline company would seek to pipeline at the existing certificated our recommendations to the negotiate a mutually acceptable MAOP. Williams is identifying the Commission. agreement. However, if the project is modification in the application for The EA will discuss impacts that approved by the commission, that informational purposes. could occur as a result of the approval conveys with it the right of The location of the proposed project construction and operation of the eminent domain. Therefore, if easement facilities is shown in appendix 1.2 proposed project under these general negotiations fail to produce an headings: agreement, the pipeline company could Land Requirements for Construction • Land use initiate condemnation proceedings in The only additional land required for • Cultural resources accordance with state law. this project is about 0.21 acre of land • Vegetation and wildlife A fact sheet prepared by the FERC required to construct a new access road • Air quality and noise entitled ‘‘An Interstate Natural Gas on the north side of the Welda • Endangered and threatened species • Facility On My Land? What Do I Need Compressor Station. All other proposed Public safety To Know?’’ was attached to the project construction work would take place This preliminary list of issues may be notice Williams provided to within the 17-acre Welda Compressor changed based on your comments and landowners. This fact sheet addresses a Station requiring a disturbance of about our analysis. We will also evaluate number of typically asked questions, 3.89 acres and within the 73-acre possible alternatives to the proposed including the use of eminent domain Ottawa Compressor Station requiring a project or portions of the project, and and how to participate in the disturbance of about 2.53 acres. make recommendations on how to Commission’s proceedings. It is lessen or avoid impacts on the various available for viewing on the FERC The EA Process resource areas. Internet website (www.ferc.fed.us). The National Environmental Policy Our independent analysis of the Act (NEPA) requires the Commission to issues will be in the EA. Depending on Summary of the Proposed Project take into account the environmental the comments received during the Williams proposes to: impacts that could result from an action scoping process, the EA may be • Abandon by removal seven 1,000- whenever it considers the issuance of a published and mailed to Federal, state, hp Cooper Type 22 compressors at its Certificate of Public Convenience and and local agencies, public interest Ottawa Compressor Station in Franklin Necessity. NEPA also requires us 3 to groups, interested individuals, affected County, Kansas; and discover and address concerns the landowners, newspapers, libraries, and • Install one 6,107-hp Solar Centaur public may have about proposals. We the Commission’s official service list for 50 turbine and appurtenant facilities at call this ‘‘scoping.’’ The main goal of the this proceeding. A comment period will its Welda Compressor Station in scoping process is to focus the analysis be allotted for review if the EA is Anderson County, Kansas in in the EA on the important published. We will consider all replacement of the compressors environmental issues. By this Notice of comments on the EA before we make proposed to be abandoned at its Ottawa Intent, the Commission requests public our recommendations to the Compressor Station. comments on the scope of the issues it Commission. The system modifications would will address in the EA. All comments To ensure your comments are increase operating efficiency and received are considered during the considered, please carefully follow the reliability on this segment of Williams’ preparation of the EA. State and local instructions in the public participation pipeline system. Williams indicates that government representatives are section below. due to their obsolescence, abandonment encouraged to notify their constituents Public Participation of the compressors would enable of this proposed action and encourage Williams to eliminate maintenance and them to comment on their areas of You can make a difference by parts procurement problems associated concern. providing us with your specific with these compressors. Replacement of Our independent analysis of the comments or concerns about the project. this compression at the Welda issues will be in the EA. Depending on By becoming a commentor, your Compressor Station with a new 6,107- concerns will be addressed in the EA hp turbine would enable Williams to 2 The appendices referenced in this notice are not and considered by the Commission. You operate its Ottawa-Welda 20-inch- being printed in the Federal Register. Copies are should focus on the potential diameter pipeline at the existing available on the Commission’s website at the environmental effects of the proposal, designed and certificated maximum ‘‘RIMS’’ link or from the Commission’s Public alternatives to the proposal, and Reference and Files Maintenance Branch, 888 First allowable operating pressure (MAOP) of Street, NE., Washington, DC 20426, or call (202) measures to avoid or lessen 690 pounds per square inch gauge 208–1371. For instructions on connecting to RIMS environmental impact. The more during periods of peak withdrawal from refer to the last page of this notice. Copies of the specific your comments, the more useful the Welda Storage Complex. appendices were sent to all these receiving this they will be. Please carefully follow notice in the mail. Williams indicates that pursuant to 18 3 ‘‘Us’’, ‘‘we’’ and ‘‘our’’ refer to the these instructions to ensure that your Code of Federal Regulation (CFR) environmental staff of the FERC’s Office of Energy comments are received in time and 2.55(a) of the Commission’s regulations, Projects. properly recorded:
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• Send an original and two copies of notices, and rulemakings. From the Street, NE., Washington, DC 20426. your letter to: David P. Boergers, FERC Internet website, click on the Beginning November 1, 2000, comments Secretary, Federal Energy Regulatory ‘‘CIPS’’ link, select ‘‘Docket #’’ from the and protests may be filed electronically Commission, 888 First St., N.E., Room CIPS menu, and follow the instructions. via the internet in lieu of paper. See, 18 1A, Washington, DC 20426. For assistance with access to CIPS, the CFR 385.2001(a)(1)(iii) and the • Label one copy of the comments for CIPS helpline can be reached at (202) instructions on the Commission’s web the attention of the Gas Group 2, PJ– 208–2474. site at http;//www.ferc.fed.us/efi/ 11.2. doorbell.htm. • Reference Docket No. CP01–10– David P. Boergers, The Commission’s Rules of Practice 000. Secretary. and Procedure require all interveners • Mail your comments so that they [FR Doc. 00–27849 Filed 10–31–00; 8:45 am] filing documents with the Commission will be received in Washington, DC on BILLING CODE 6717±01±M to serve a copy of that document on or before November 24, 2000. Beginning each person on the official service list November 1, 2000, comments and for the project. Further, if an intervener protests may be filed electronically via DEPARTMENT OF ENERGY files comments or documents with the the internet in lieu of paper. See, 18 Commission relating to the merits of an CFR 385.200(a)(1)(iii) and the Federal Energy Regulatory issue that may affect the responsibilities instructions on the Commission’s web Commission of a particular resource agency, they site at http://www.ferc.fed.us/efi/ Notice of Request To Use Alternative must also serve a copy of the document doorbell.htm. on that resource agency. Procedures in Preparing a Licenses k. The existing Coosa River Project Becoming an Intervenor Application consists of five developments (Weiss, In addition to involvement in the EA October 25, 2000. Neely Henry, Logan Martin, Lay, scoping process, you may want to Take notice that the following request Bouldin) with a total rated capacity of become an official party to the to use alternative procedures to prepare 705.78 MW, Lay and Bouldin operate proceeding known as an ‘‘intervenor.’’ a license application has been filed with principally as run-of-river the other Intervenors play a more formal role in the Commission. three as peaking projects. The Mitchell the process. Among other things, a. Type of Application: Request to use Project has a rated capacity of 170 MW intervenors have the right to receive alternative procedures to prepare a and operates run-of-river. The Jordan copies of case-related Commission license application has been filed with Project has a rated capacity of 100 MW documents and filings by other the Commission. and operates principally as run-of-river. intervenors. Likewise, each intervenor b. Project Nos.: P–2146, P–2146, P–82, The Jordan Project has a rated capacity must provide 14 copies of its filings to P–618, and P–2165. of 100 MW and operates principally as the Secretary of the Commission and c. Date filed: September 22, 2000. run-of-river. The Warrior River Projects must send a copy of its filings to all d. Applicant: Alabama Power consists of two developments (Lewis other parties on the Commission’s Company. Smith and Bankhead) with a total rated service list for this proceeding. If you e. Name of Projects: Coosa River capacity of 210 MW, Lewis Smith is a want to become an intervenor you must Project, Mitchell Project, Jordan Project, peaking project and Bankhead operates file a motion to intervene according to and Warrior River Projects, collectively principally as run-of-river. Rule 214 of the Commission’s Rules of called the Coosa-Warrior Projects. l. Alabama Power Company (APC) has Practice and Procedure (18 CFR f. Location: On the Coosa and Warrior demonstrated that it has made an effort 385.214) (see appendix 2). Only Rivers, in Cherokee, Etowah, Calhoun, to contact all federal and state resources intervenors have the right to seek St. Clair, Talladega, Chilton, Coosa, agencies, non-governmental rehearing of the Commission’s decision. Shelby, Elmore, Walker, Winston, organizations (NGO), and others affected Affected landowners and parties with Cullman, and Tuscaloosa Counties, by the project. APC has also environmental concerns may be granted Alabama and Floyd County, Georgia. demonstrated that a consensus exists intervenor status upon showing good The Warrior River Project occupies that the use of alternative procedures is cause by stating that they have a clear federal lands within the Bankhead appropriate in this case. APC has and direct interest in this proceeding National Forest. submitted a communications protocol which would not be adequately g. Filed Pursuant to: Federal Power that is supported by the stakeholders. represented by any other parties. You do Act, 16 U.S.C. 791(a)–825(r). The purpose of this notice is to invite not need intervenor status to have your h. Applicant Contacts: Jim Crew, any additional comments on Alabama environmental comments considered. Relicensing Project Manager, Alabama Power Company’s request to use the Additional information about the Power Company, 600 North 18th Street, alternative procedures, pursuant to proposed project is available from the Birmingham, AL 35291, (205) 257–4265 Section 4.34(i) of Commission’s Commission’s Office of External Affairs or Barry Lovett Project Manager, regulations. Additional notices seeking at (202) 208–0004 or on the FERC Alabama Power Company, 600 North comments on the specific project website (www.ferc.fed.us) using the 18th Street, Birmingham, AL35291, proposal, interventions and protests, ‘‘RIMS’’ link to information in this (205) 257–1268. and recommended terms and conditions docket number. Click on the ‘‘RIMS’’ i. FERC Contact: Ronald McKitrick at will be issued at a later date. APC will link, select ‘‘Docket #’’ from the RIMS (770) 452–3778; e-mail complete and file a preliminary Menu, and follow the instructions. For [email protected]. Environmental Assessment, in lieu of assistance with access to RIMS, the j. Deadline for Comments: 30 days Exhibit E of the license application. RIMS helpline can be reached at (202) from the date of this notice. Project No. This differs from the traditional process, 208–2222. 2146, et al. in which an applicant consults with Similarly, the ‘‘CIPS’’ link on the All documents (original and eight agencies, Indian tribes, NGOs, and other FERC Internet website provides access copies) should be filed with: David P. parties during preparation of the license to the texts of formal documents issued Boergers, Secretary, Federal Energy application and before filing the by the Commission, such as orders, Regulatory Commission, 888 First application, but the Commission staff
VerDate 112000 19:49 Oct 30, 2000 Jkt 194001 PO 00000 Frm 00018 Fmt 4703 Sfmt 4703 E:\FR\FM\31OCN1.SGM pfrm02 PsN: 31OCN1 64944 Federal Register / Vol. 65, No. 211 / Tuesday, October 31, 2000 / Notices performs the environmental review after Street, NE., Washington, DC 20426. representative of the Applicant the application is filed. The alternative Beginning November 1, 2000, comments specified in the particular application. procedures are intended to simplify and and protests may be filed electronically Agency comments—Federal, state, expedite the licensing process by via the internet in lieu of paper. See, 18 and local agencies are invited to file combining the pre-filing consultation CFR 385.2001(a)(1)(iii) and the comments on the described application. and environmental review processes instructions on the Commission’s web A copy of the application may be into a single process, to facilitate greater site at http://www.ferc.fed.us/efi/ obtained by agencies directly from the participation, and to improve doorbell.htm. Applicant. If an agency does not file communication and cooperation among Please include the Project Number comments within the time specified for the participants. (7115–031) on any comments or filing comments, it will be presumed to Alabama Power Company has met motions filed. have no comments. One copy of an within federal and state resources k. Description of Amendment: agency’s comments must also be sent to agencies, NGOs, elected officials, Pursuant to Sections 4.200(c) and the Applicant’s representatives. environmental groups, business and 4.202(a) of the Commission’s regulations David P. Boergers, economic development organizations, and Public Law No. 106–213, the Secretary. and members of the public regarding the applicant requests that its license be [FR Doc. 00–27852 Filed 10–30–00; 8:45 am] Coosa-Warrior projects. APC intends to amended to extend the deadline for BILLING CODE 6717±01±M file 6-month progress reports during the commencement of construction for 3 alternative procedures process that consecutive 2-year periods. The leads to the filing of a license applicant also requests that completion ENVIRONMENTAL PROTECTION application by July, 2005. of construction be extended by an AGENCY David P. Boergers, additional four years from any extended commencement of construction date [OPPTS±50040; FRL±6746±7] Secretary. that the Commission grants. [FR Doc. 00–27851 Filed 10–30–00; 8:45 am] l. Location of the Application: a copy Proposed Correction to Chemical BILLING CODE 6717±01±M of the application is available for Nomenclature for Monomer Acid and inspection and reproduction at the Derivatives for TSCA Inventory Purposes DEPARTMENT OF ENERGY Commission’s Public Reference Room, located at 888 First Street, NE, Room AGENCY: Environmental Protection Federal Energy Regulatory 2A, Washington, DC 20426, or by calling Agency (EPA). Commission (202) 208–1371. This Filing may be ACTION: Notice. viewed on http://www.ferc.fed.us/ Notice of Amendment of License and online/rims.htm (call (202) 208–2222 for SUMMARY: An August 2, 1985 letter from Soliciting Comments, Motions To assistance). A copy is also available for EPA erroneously equates monomer acid Intervene, and Protests inspection and reproduction at the and its derivatives with Tall Oil Fatty address in item h above. Acid (TOFA) and its corresponding October 25, 2000. m. Individuals desiring to be included derivatives for Toxic Substances Control Take notice the following on the Commission’s mailing list should Act (TSCA) Inventory purposes when, hydroelectric application has been filed so indicate by writing to the Secretary in fact, they are chemically distinct. As with the Commission and is available of the Commission. a result, many manufacturers of for public inspection: Comments, Protests, or Motions to monomer acid derivatives have not a. Application Type: Amendment of Intervene—Anyone may submit submitted Premanufacture Notices License. comments, a protest, or a motion to (PMNs) under TSCA section 5, because b. Project No.: 7115–031. intervene in accordance with the the letter incorrectly indicated that c. Date Filed: June 23, 2000. monomer acid derivatives were covered d. Applicant: Homestead Energy requirements of rules of Practice and Procedure, 18 CFR 385.210, .211, .214. by TOFA derivatives already on the Resources, LLC. Inventory. This notice proposes a e. Name of Project: George W. In determining the appropriate action to correction to the 1985 letter on Andrews. take, the Commission will consider all nomenclature of monomer acid and f. Location: At the Corps of Engineers’ protests or other comments filed, but derivatives. With this proposed George W. Andrews Lock and Dam on only those who file a motion to correction, monomer acid derivatives the Chattahoochee River in Houston intervene in accordance with the that are not on the Inventory would be County, Alabama and Early County, Commission’s Rules may become a considered new chemical substances Georgia. party to the proceeding. Any comments, g. Filed Pursuant to: Federal Power protests, or motions to intervene must under section 5 of TSCA. Act, 16 U.S.C. 791(a)–825(r). be received on or before the specified DATES: Comments, identified by the h. Applicant Contact: Charles B. comment date for the particular docket control number [OPPTS–50040], Mierek, Homestead Energy Resources, application. must be received by EPA on or before LLC., 5250 Clifton-Glendale Rd., Filing and Service of Responsive January 2, 2001. Spartanburg, SC 29307–4618, (864) 579– Documents—Any filings must bear in ADDRESSES: Comments may be 4405. all capital letters the title submitted by mail, electronically, or in i. FERC Contact: Regina Saizan, (202) ‘‘COMMENTS’’, person. Please follow the detailed 219–2673. ‘‘RECOMMENDATIONS FOR TERMS instructions for each method as j. Deadline for filing comments and or AND CONDITIONS’’, ‘‘PROTEST’’, OR provided in Unit I.C. of the motions: December 1, 2000. ‘‘MOTION TO INTERVENE’’, as SUPPLEMENTARY INFORMATION: To ensure All documents (original and eight applicable, and the Project Number of proper receipt by EPA, it is imperative copies) should be filed with: David P. the particular application to which the that you identify docket control number Boergers, Secretary, Federal Energy filing refers. A copy of any motion to OPPTS–50040 in the subject line on the Regulatory Commission, 888 First intervene must also be served upon each first page of your response.
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FOR FURTHER INFORMATION CONTACT: For whether or not this action might apply of Pollution Prevention and Toxics general information contact: Barbara to certain entities. If you have questions (OPPT), Environmental Protection Cunningham, Acting Director, regarding the applicability of this action Agency, 1200 Pennsylvania Ave., NW., Environmental Assistance Division to a particular entity, consult the Washington, DC 20460. (7401), Office of Pollution Prevention technical person listed under FOR 2. In person or by courier. Deliver and Toxics, Environmental Protection FURTHER INFORMATION CONTACT. your comments to: OPPT Document Agency, 1200 Pennsylvania Ave., NW., Control Office (DCO) in East Tower Rm. B. How Can I Get Additional G-099, Waterside Mall, 401 M St., SW., Washington, DC 20460; telephone Information, Including Copies of this numbers: 202–554–1404; e-mail Washington, DC. The DCO is open from Document and Other Related 8 a.m. to 4 p.m., Monday through address: [email protected]. Documents? For technical information contact: Friday, excluding legal holidays. The Kenneth Moss, Chemical Control 1. Electronically. You may obtain telephone number for the DCO is (202) Division (7405), Office of Pollution electronic copies of this document, and 260–7093. Prevention and Toxics, Environmental certain other related documents that 3. Electronically. You may submit Protection Agency, 1200 Pennsylvania might be available electronically, from your comments electronically by e-mail Ave., NW., Washington, DC 20460; the EPA Internet Home Page at http:// to: ‘‘[email protected],’’ or mail your telephone number: 202–260–3395; fax www.epa.gov/. To access this computer disk to the address identified number: 202–260–0118; e-mail address: document, on the Home Page select above. Do not submit any information [email protected]. ‘‘Laws and Regulations’’ and then look electronically that you consider to be SUPPLEMENTARY INFORMATION: up the entry for this document under CBI. Electronic comments must be the ‘‘Federal Register—Environmental submitted as an ASCII file avoiding the I. General Information Documents.’’ You can also go directly to use of special characters and any form A. Does this Document Apply to Me? the Federal Register listings at http:// of encryption. Comments and data will www.epa.gov/fedrgstr/. To access also be accepted on standard disks in You may be affected by this document information about EPA’s New WordPerfect 6.1/8.1 or ASCII file if you are, or may in the future be, a Chemicals Program, go directly to the format. All comments in electronic form manufacturer or importer of a monomer Home Page at http://www.epa.gov/oppt/ must be identified by docket control acid derivative that requires submission newchems/. number OPPTS–50040. Electronic of a Premanufacture Notice (PMN) or 2. In person. The Agency has comments may also be filed online at Significant New Use Notice (SNUN) established an official record for this many Federal Depository Libraries under the Toxic Substances Control Act action under docket control number (TSCA). Special rules apply to persons OPPTS–50040. The official record D. How Should I Handle Confidential who manufactured (or processed) these consists of the documents specifically Business Information That I Want to chemicals between August 2, 1985, and referenced in this action, any public Submit to the Agency? 12 months following the date of comments received during an applicable Do not submit any information publication of the final nomenclature comment period, and other information electronically that you consider to be correction notice in the Federal related to this action, including any confidential business information (CBI). Register. Potentially affected entities information claimed as confidential You may claim information that you may include, but are not limited to the business information (CBI). This official submit to EPA in response to this following: record includes the documents that are document as CBI by marking any part or physically located in the docket, as well all of that information as CBI. as the documents that are referenced in Information so marked will not be those documents. The public version of disclosed except in accordance with Examples of Po- the official record does not include any procedures set forth in 40 CFR part 2. Category NAICS tentially Affected Codes Entities information claimed as CBI. The public In addition to one complete version of version of the official record, which the comment that includes any Chemical 325, Anyone who man- includes printed, paper versions of any information claimed as CBI, a copy of manu- 32411 ufactures or im- electronic comments submitted during the comment that does not contain the facturers ports, or who an applicable comment period, is information claimed as CBI must be or im- plans to manu- available for inspection in the TSCA submitted for inclusion in the public porters facture or im- Nonconfidential Information Center, version of the official record. port, a monomer North East Mall, Rm. B–607, Waterside acid derivative Information not marked confidential or other ``down- Mall, 401 M St., SW., Washington, DC. will be included in the public version stream'' sub- The Center is open from noon to 4 p.m., of the official record without prior stance based on Monday through Friday, excluding legal notice. If you have any questions about monomer acid holidays. The telephone number for the CBI or the procedures for claiming CBI, for a non-ex- Center is (202) 260–7099. please consult the technical person empt commer- identified under FOR FURTHER cial purpose C. How and to Whom Do I Submit Comments? INFORMATION CONTACT. This listing is not intended to be You may submit comments through E. What Should I Consider as I Prepare exhaustive, but rather provides a guide the mail, in person, or electronically. To My Comments for EPA? for readers regarding entities likely to be ensure proper receipt by EPA, it is You may find the following affected by this action. Other types of imperative that you identify docket suggestions helpful for preparing your entities not listed in the table could also control number OPPTS–50040 in the comments: be affected. The North American subject line on the first page of your 1. Explain your views as clearly as Industrial Classification System response. possible. (NAICS) codes have been provided to 1. By mail. Submit your comments to: 2. Describe any assumptions that you assist you and others in determining Document Control Office (7407), Office used.
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3. Provide copies of any technical and generally known as monomer acid or toward a mutual understanding of the information and/or data you used that monomer fatty acid is considered to be the correct nomenclature for these chemical support your views. same as tall oil fatty acids for TSCA substances that previously were 4. If you estimate potential burden or Inventory purposes. . . .Because the names believed to be on the Inventory, and oleic acid, octadecenoic acid, and tall oil costs, explain how you arrived at the fatty acid may have been used to represent have mutually developed procedures to estimate that you provide. the same substance on the Inventory, they are implement the nomenclature change. In 5. Provide specific examples to synonymous terms within the context of the 1994, the Pine Chemicals Association illustrate your concerns. Inventory. If one wishes to determine if a (PCA, then known as the Pulp 6. Offer alternative ways to improve substance derived from monomer acid is on Chemicals Association) asked EPA to the notice or collection activity. the Inventory, and he finds a similar clarify the Agency’s chemical 7. Make sure to submit your derivative under any of these names, his nomenclature policy for dimer acids. At comments by the deadline in this product is on the Inventory. (See docket for that time several alternative listings for full text.) notice. dimer acid were present in the 8. To ensure proper receipt by EPA, Tall oil is a source for natural fatty Inventory, and PCA and EPA agreed that be sure to identify the docket control acids, commonly referred to as Tall Oil one description, ‘‘Fatty Acids, C18 number assigned to this action in the Fatty Acids (TOFA). TOFA may be unsaturated, dimers (CASRN 61788–89– subject line on the first page of your reacted with other substances to create 4),’’ would describe dimer acids response. You may also provide the TOFA derivatives. TOFA that is heated irrespective of the fatty acid source name, date, and Federal Register in the presence of an acid clay catalyst (except for the crude form of dimer acid citation. forms a ‘‘dimer acid’’ together with that is not made from oleic acid or II. Background small amounts of ‘‘trimer acid’’ and linoleic acid, and is used directly as a higher oligomers. The ‘‘dimer acid’’ crude chemical intermediate, which is A. What Action is the Agency Taking? process also produces ‘‘monomer acid’’ instead named ‘‘Fatty acids, C16-18 and An August 2, 1985 letter from EPA as a co-product. The monomer acid is C18-unsatd., dimerized (CASRN 71808– erroneously equates monomer acid and often used as an inexpensive fatty acid 39–4)’’). Subsequently, over 100 its derivatives with Tall Oil Fatty Acid source to make monomer acid Inventory corrections were filed and the (TOFA) and its corresponding derivatives or other downstream dimer acid issue successfully resolved. derivatives for TSCA Inventory products for use in lubricants, greases, During this program it was also realized purposes when, in fact, they are hot melt adhesives, printing ink resins, that a similar issue existed for a co- chemically distinct. As a result, many ore flotation agents, corrosion product, monomer acid, as there were manufacturers of monomer acid inhibitors, etc. four separate ways in which it was derivatives have not submitted PMNs It is clear that the TOFA dimerization identified in the Inventory. As a under TSCA section 5, because the letter process yields distinct chemical consequence, different types of incorrectly indicated that monomer acid substances that may be separated by chemical names exist on the Inventory derivatives were covered by TOFA distillation: Dimer acid, trimer acid, and for derivatives and other downstream derivatives already on the Inventory. monomer acid. Whereas the natural products based on monomer acids. EPA This notice proposes a correction to the source-derived TOFA largely consists of and PCA agreed that it would be 1985 letter on nomenclature of linear C18-unsaturated carboxylic acids, necessary to correct the existing monomer acid and derivatives. With principally oleic and linoleic acids, Inventory listings under a uniform this proposed correction, monomer acid monomer acid contains relatively small nomenclature. derivatives that are not on the Inventory amounts of oleic and linoleic acids, and EPA also acknowledged that the would be considered new chemical instead contains significant amounts of August 2, 1985 Agency letter had substances under section 5 of TSCA. branched and cyclic C18 acids, both erroneously equated monomer acid saturated and unsaturated, as well as derivatives with TOFA derivatives and B. What is the Agency’s Authority for elaidic acid. The more diverse and derivatives of oleic acid or octadecenoic Taking this Action? significantly branched composition of acid, when in fact they are chemically Section 5 of TSCA requires any monomer acid results from the thermal distinct. Because the guidance found in person who intends to manufacture catalytic processing carried out on the 1985 letter led the manufacturers to (defined by statute to include import) a TOFA or analogous feedstocks. believe that the products they new chemical (i.e., a chemical not on Further, the reaction of monomer acid manufactured were already on the the TSCA Inventory) to notify EPA and with other chemical substances also Inventory under a name based on comply with the statutory provisions yields unique, identifiable derivative TOFA, oleic acid, or octadecenoic acid, pertaining to the manufacture of new substances which are chemically since 1985 a number of manufacturers chemicals. Section 8(b) of TSCA different from corresponding TOFA of monomer acid products have not requires EPA to compile, keep current, derivatives. Therefore, it is incorrect to submitted PMNs required under section and publish a list of each chemical equate monomer acid to TOFA, or a 5 of TSCA. monomer acid derivative to a TOFA substance which is manufactured or III. Proposed TSCA New Chemicals processed in the United States (the derivative. Oleic acid and octadecenoic acid are Program Policy for Monomer Acid TSCA Inventory). This requirement Chemical Nomenclature includes defining the scope of the also unique, identifiable substances that listings on the Inventory. are distinguished from monomer acid Today’s proposed nomenclature because of their essentially linear, correction constitutes official notice that C. Why is this Proposed Nomenclature unsaturated acid composition. Thus, the EPA’s August 2, 1985 letter was Correction Necessary? derivatives of oleic and octadecenoic erroneous and that monomer acids are The August 2, 1985 EPA letter to an acid are also unique, identifiable, and not equivalent to TOFA, oleic acid, or industry representative on the different from monomer acid octadecenoic acid for Inventory nomenclature for monomer acids states: derivatives. purposes. Under this proposed notice The co-product produced during the Through dialogue over the last 6 PMNs are required for monomer acid catalytic dimerization of tall oil fatty acids years, EPA and industry have worked derivatives that are not on the TSCA
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Inventory and which are manufactured days before the effective date to ensure chemical substance that are in the on or after the effective date of the final that Agency review is completed before possession or control of the PMN notice. In accordance with Inventory this nomenclature correction takes submitter, or known to or reasonably correction guidelines (45 FR 50544; July effect. ascertainable by the PMN submitter, 29, 1980), because these monomer acid EPA will work closely with chemical must also be submitted or described by derivatives were not manufactured manufacturers and importers to resolve each individual manufacturer or during the Initial Inventory reporting chemical nomenclature of specific importer, as specified in 40 CFR 720.50. period and were never reported for the monomer acid derivatives whose There may be some manufacturers that Initial TSCA Inventory, they are not Inventory status is uncertain. EPA is do not wish to participate in a eligible for Inventory correction as an taking two specific steps to facilitate the consolidated PMN; these manufacturers alternative to PMN submission. Premanufacture Notice process for can submit individual notices separately chemical substances currently using the for their corrected nomenclature. A. What is the Basis for and Scope of incorrect nomenclature. For the If a person intends to manufacture a this Proposed Nomenclature Correction? purposes of this proposed nomenclature monomer acid derivative or monomer EPA no longer considers as valid the correction only, EPA is suspending its acid-based downstream product for the nomenclature interpretation in the TSCA new chemicals program policy of first time before the effective date, and August 2, 1985 EPA letter which stated: a limit of six chemical substances per there is no corresponding Inventory The co-product produced during the consolidation notice and waiving PMN listing using the old nomenclature for catalytic dimerization of tall oil fatty acids fees for any PMN submissions required that particular substance, this person and generally known as ‘‘monomer acid’’ or as a result of the proposed nomenclature must submit a regular PMN, using the ‘‘monomer fatty acid’’ is considered to be the correction. However, consistent with the correct nomenclature, at least 90 days same as tall oil fatty acids for TSCA Inventory purposes. . . .Because the names Agency’s chemical nomenclature before manufacture of that substance. oleic acid, octadecenoic acid, and tall oil requirements for consolidated notices, The special consolidated PMN reporting fatty acid may have been used to represent submitters must use the Chemical process involving PCA, as described in the same substance on the Inventory, they are Abstract Service (CAS) Inventory Expert this section, cannot be used to report synonymous terms within the context of the Service to develop correct Chemical such new derivatives or downstream Inventory. If one wishes to determine if a Abstracts (CA) names for all of their products. substance derived from monomer acid is on reported substances, in accordance with C. What are the Consequences of Not the Inventory, and he finds a similar Method 1 as described in the Revision Submitting a PMN and Completing PMN derivative under any of these names, his of Premanufacture Notification product is on the Inventory. Review on a Monomer Acid Derivative Regulations (60 FR 16298; March 29, before the Effective Date of this The proposed nomenclature 1995) (FRL–4921–8), 40 CFR 720.45(a). Proposed Nomenclature Correction correction affects anyone who EPA encourages conversion to the new Notice? manufactures or imports, or who plans nomenclature immediately instead of to manufacture or import, a monomer delaying the correction to the effective On the effective date of the final acid derivative or other ‘‘downstream’’ date of this proposed notice. nomenclature correction notice, TOFA, substance based on monomer acid for a EPA expects that there will be at least oleic acid, or octadecenoic acid will no non-exempt commercial purpose. The several consolidated PMNs submitted as longer be considered equivalent to correct nomenclature now required for a result of this proposed nomenclature monomer acid. Starting on the effective monomer acid is ‘‘Fatty acids, C16-18 correction, and there may also be date, anyone manufacturing a chemical and C18-unsatd., branched and linear’’ individual PMNs filed. It may be substance based on monomer acid that (CAS Registry Number 68955–98–6). For possible that only one consolidated is not specifically listed on the TSCA TSCA Inventory purposes, derivatives PMN is necessary for each chemical Inventory using the correct and other downstream products made class of product based on monomer nomenclature for the monomer acid from monomer acids must be named acid. These notices can be submitted by component of the chemical substance consistently with this nomenclature for individual companies or as part of an name will be in violation of TSCA. A monomer acid. organized effort to submit consolidated person may, of course, continue to PMNs. It is expected that the affected manufacture TOFA derivatives and B. What are the Key Dates and manufacturers and importers of derivatives of oleic acid or octadecenoic Provisions of this Proposed monomer acid and its derivatives or acid listed on the Inventory without Nomenclature Correction? other downstream products, supported submitting a PMN. The proposed effective date for this by PCA, will prepare consolidated D. Is a PMN Required for Everyone Who new nomenclature interpretation, PMNs. In such cases, PMN Standard Did Not Submit One Since 1985 because described in Unit III.A., will be 12 Form pages 8 through 11 of each months following the date of consolidated PMN may be filled out by of the Incorrect EPA Guidance, publication of the final nomenclature PCA or another organization (this Regardless of Whether this Person Still correction notice in the Federal information is expected to be more Manufactures the Substance Today? Register. Prior to this effective date, generally applicable to a given class of A PMN must be submitted by those EPA will allow manufacturers to monomer acid derivative). Pages 1 persons who intend to manufacture continue commercial production of through 7, however, pertain to monomer acid and its derivatives and existing monomer acid derivatives and information that is specific to individual other downstream products not on the downstream products under the old submitters, and will need to be filled TSCA Inventory on or after the effective nomenclature. After the effective date, out by the individual manufacturers and date of the final nomenclature companies that manufacture monomer importers. The individual correction notice. For example, if you acid derivatives and downstream manufacturers and importers of manufactured such a monomer acid products under the old nomenclature monomer acid derivatives will be the derivative in 1986 but are not currently will no longer be in compliance with submitter of record for each PMN manufacturing or intending to resume TSCA section 5. Therefore, companies chemical substance. Other information, manufacture, you are not required to would need to submit PMNs at least 90 such as toxicity data on the PMN submit a PMN now. However, if you
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How will EPA Handle CBI in as described in sections 203 and 204 of and 185,000+ burden hours annually. Consolidated PMNs? UMRA. Nor does this action An additional six PMNs at 100 hours Consistent with current law, policy significantly or uniquely affect the each would be covered by these current and practice in the New Chemicals communities of tribal governments as estimates. Program, multiple persons submitting specified by Executive Order 13084, As defined by the Paperwork information required in a specific entitled Consultation and Coordination Reduction Act and 5 CFR 1320.3(b), consolidated PMN may make separate with Indian Tribal Governments (63 FR ‘‘burden’’ means the total time, effort, or submissions to EPA so as to not disclose 27655, May 10, 1998). This action will financial resources expended by persons CBI to one another. For example, a not have substantial direct effects on the to generate, maintain, retain, or disclose customer of a PMN submitter of record States, on the relationship between the or provide information to or for a who also is a manufacturer of monomer national government and the States, or Federal agency. This includes the time acid derivatives may submit a letter of on the distribution of power and needed to review instructions; develop, support, confidential from the supplier, responsibilities among the various acquire, install, and utilize technology directly to EPA for TSCA section 5 levels of government, as specified in and systems for the purposes of notification, giving complete chemical Executive Order 13132, entitled collecting, validating, and verifying identity, health and safety, use, Federalism (64 FR 43255, August 10, information, processing and production volume, or process 1999). maintaining information, and disclosing information, etc. This enables the This action does not involve any and providing information; adjust the customer to disclose any specific CBI to technical standards that require the existing ways to comply with any EPA but not to the other parties in the Agency’s consideration of voluntary previously applicable instructions and consolidated PMN. consensus standards pursuant to section requirements; train personnel to be able 12(d) of the National Technology IV. Do Any of the Regulatory to respond to a collection of Transfer and Advancement Act of 1995 information; search data sources; Assessment Requirements Apply to this (NTTAA), Public Law 104–113, section Action? complete and review the collection of 12(d) (15 U.S.C. 272 note). information; and transmit or otherwise A. General In issuing this action, EPA has taken disclose the information. the necessary steps to eliminate drafting Comments regarding the Agency’s No. This document is not a rule. It errors and ambiguity, minimize only seeks comment on a proposed need for this information, the accuracy potential litigation, and provide a clear of the provided burden estimates, and correction to TSCA Inventory legal standard for affected conduct, as any suggested methods for minimizing nomenclature. As such, this action does required by section 3 of Executive Order respondent burden, including through not require review by the Office of 12988, entitled Civil Justice Reform (61 the use of automated collection Management and Budget (OMB) under FR 4729, February 7, 1996). Executive Order 12866, entitled EPA has complied with Executive techniques, should be submitted as Regulatory Planning and Review (58 FR Order 12630, entitled Governmental described in Unit I.C. 51735, October 4, 1993) or Executive Actions and Interference with List of Subjects Order 13045, entitled Protection of Constitutionally Protected Property Children from Environmental Health Environmental protection, Chemical Rights (53 FR 8859, March 15, 1988), by substances, Hazardous substances, Risks and Safety Risks (62 FR 19885, examining the takings implications of April 23, 1997). Reporting and recordkeeping this action in accordance with the requirements. Because this action is not ‘‘Attorney General’s Supplemental economically significant as defined by Guidelines for the Evaluation of Risk Dated: October 20, 2000. section 3(f) of Executive Order 12866, and Avoidance of Unanticipated Susan H. Wayland, this action is not subject to Executive Takings’’ issued under the Executive Acting Assistant Administrator, Office of Order 13045, entitled Protection of Order. Prevention, Pesticides and Toxic Substances. Children from Environmental Health [FR Doc. 00–27927 Filed 10–30–00 8:45 am] Risks and Safety Risks (62 FR 19885, B. Paperwork Reduction Act April 23, 1997). This document does not contain any BILLING CODE 6560±50±S This action will not result in new information collection environmental justice related issues and requirements that would require does not, therefore, require special additional OMB review and approval. FEDERAL COMMUNICATIONS consideration under Executive Order The information collection activities COMMISSION 12898, entitled Federal Actions to related to the submission of information Technological Advisory Council Address Environmental Justice in pursuant to TSCA section 5 has been Meeting Minority Populations and Low-Income already approved by OMB under OMB Populations (59 FR 7629, February 16, control number 2070-00012 (EPA ICR AGENCY: Federal Communications 1994). No.574). The annual respondent burden Commission. This action is not subject to notice- for this information collection activity is ACTION: Notice of public meeting. and-comment requirements under the estimated to average 100 hours per Administrative Procedure Act or any respondent, including time for reading SUMMARY: In accordance with the other statute, and is not subject to the the regulations, processing, compiling Federal Advisory Committee Act, 5 provisions of the Regulatory Flexibility and reviewing the requested data, U.S.C. App. 2, Public Law 92–463, as
VerDate 112000 19:49 Oct 30, 2000 Jkt 194001 PO 00000 Frm 00023 Fmt 4703 Sfmt 4703 E:\FR\FM\31OCN1.SGM pfrm02 PsN: 31OCN1 Federal Register / Vol. 65, No. 211 / Tuesday, October 31, 2000 / Notices 64949 amended, this notice advises interested persons as possible. However, Governors not later than November 24, persons of the seventh meeting of the admittance will be limited to the seating 2000. Technological Advisory Council available. Depending on the Council’s A. Federal Reserve Bank of Atlanta (‘‘Council’’), which will be held at the progress at this meeting, public (Cynthia C. Goodwin, Vice President) Federal Communications Commission participation may be permitted at the 104 Marietta Street, N.W., Atlanta, in Washington, DC. discretion of the Council’s Chairman. Georgia 30303–2713: DATES: Wednesday, December 6, 2000 at Interested persons may submit written 1. First National Bankers Bankshares, 10:00 a.m. comments to David Farber, the Inc., Baton Rouge, Louisiana; to acquire ADDRESSES: Federal Communications Council’s Designated Federal Officer, 100 percent of the voting shares of Commission, 445 12th St. S.W., Room before the meeting either by e-mail Mississippi National Bankers Bank, TW–C305, Washington DC 20554. ([email protected]) or by U.S. mail to Ridgeland, Mississippi (in organization). FOR FURTHER INFORMATION CONTACT: Kent David Farber, Chief Technologist, Room Board of Governors of the Federal Reserve Nilsson at [email protected] or 202– 7–C161, Office of Engineering & System, October 26, 2000. 418–0845. Technology, Federal Communications Robert deV. Frierson, SUPPLEMENTARY INFORMATION: The Commission, 445 12th Street, SW., Associate Secretary of the Board. Council was established by the Federal Washington, DC 20554. [FR Doc. 00–27957 Filed 10–30–00; 8:45 am] Communications Commission to Federal Communications Commission. BILLING CODE 6210±01±P provide a means by which a diverse Magalie Roman Salas, array of recognized technical experts Secretary. FEDERAL RESERVE SYSTEM from a variety of interests such as [FR Doc. 00–27905 Filed 10–30–00; 8:45 am] industry, academia, government, BILLING CODE 6712±01±U citizens groups, etc., can provide advice Notice of Proposals To Engage in to the FCC on innovation in the Permissible Nonbanking Activities or To Acquire Companies That Are communications industry. FEDERAL RESERVE SYSTEM The purpose of this seventh meeting Engaged in Permissible Nonbanking Activities will be to hear and discuss the progress Formations of, Acquisitions by, and of the three focus groups established by Mergers of Bank Holding Companies The companies listed in this notice the Council to consider the issues the have given notice under section 4 of the FCC presented to it at its April 30, 1999 The companies listed in this notice Bank Holding Company Act (12 U.S.C. meeting. These issues include: (1) The have applied to the Board for approval, 1843) (BHC Act) and Regulation Y, (12 current state of the art for software pursuant to the Bank Holding Company CFR Part 225) to engage de novo, or to defined radios, cognitive radios, and Act of 1956 (12 U.S.C. 1841 et seq.) acquire or control voting securities or similar devices, future developments for (BHC Act), Regulation Y (12 CFR Part assets of a company, including the these technologies, and ways that the 225), and all other applicable statutes companies listed below, that engages availability of such technologies might and regulations to become a bank either directly or through a subsidiary or affect the FCC’s traditional approaches holding company and/or to acquire the other company, in a nonbanking activity to spectrum management; and the assets or the ownership of, control of, or that is listed in § 225.28 of Regulation Y current state of knowledge of the power to vote shares of a bank or (12 CFR 225.28) or that the Board has electromagnetic noise levels and the bank holding company and all of the determined by Order to be closely effects of such noise on the reliability of banks and nonbanking companies related to banking and permissible for existing and future communications owned by the bank holding company, bank holding companies. Unless systems; (2) the current technical trends including the companies listed below. otherwise noted, these activities will be in telecommunications services, The applications listed below, as well conducted throughout the United States. changes that might decrease, rather than as other related filings required by the Each notice is available for inspection increase, the accessibility of Board, are available for immediate at the Federal Reserve Bank indicated. telecommunications services by persons inspection at the Federal Reserve Bank The notice also will be available for with disabilities and ways the FCC indicated. The application also will be inspection at the offices of the Board of might best communicate to designers of available for inspection at the offices of Governors. Interested persons may emerging telecommunications network the Board of Governors. Interested express their views in writing on the architectures, the requirements for persons may express their views in question whether the proposal complies accessibility; and (3) the writing on the standards enumerated in with the standards of section 4 of the telecommunications common carrier the BHC Act (12 U.S.C. 1842(c)). If the BHC Act. Additional information on all network interconnection scenarios that proposal also involves the acquisition of bank holding companies may be are likely to develop, including the a nonbanking company, the review also obtained from the National Information technical aspects of cross network (i.e., includes whether the acquisition of the Center website at www.ffiec.gov/nic/. end-to-end) interconnection, quality of nonbanking company complies with the Unless otherwise noted, comments service, network management, standards in section 4 of the BHC Act regarding the applications must be reliability, and operations issues, as (12 U.S.C. 1843). Unless otherwise received at the Reserve Bank indicated well as the deployment of new noted, nonbanking activities will be or the offices of the Board of Governors technologies such as dense wave conducted throughout the United States. not later than November 24, 2000. division multiplexing and high speed Additional information on all bank A. Federal Reserve Bank of Chicago packet/cell switching. The Council may holding companies may be obtained (Phillip Jackson, Applications Officer) also consider such other issues as come from the National Information Center 230 South LaSalle Street, Chicago, before the Council at the meeting. website at www.ffiec.gov/nic/. Illinois 60690–1414: Members of the general public may Unless otherwise noted, comments 1. Irwin Financial Corporation, attend the meeting. The Federal regarding each of these applications Columbus, Indiana; to acquire Irwin Communications Commission will must be received at the Reserve Bank Union Bank, F.S.B., Louisville, attempt to accommodate as many indicated or the offices of the Board of Kentucky, and thereby engage in
VerDate 112000 19:49 Oct 30, 2000 Jkt 194001 PO 00000 Frm 00024 Fmt 4703 Sfmt 4703 E:\FR\FM\31OCN1.SGM pfrm02 PsN: 31OCN1 64950 Federal Register / Vol. 65, No. 211 / Tuesday, October 31, 2000 / Notices operating a savings association, Information to share certain non-public FEDERAL TRADE COMMISSION pursuant to § 225.28(b)(4)(ii) of information with Canadian agencies and [File No. 972 3162] Regulation Y. the Australian Competition and Board of Governors of the Federal Reserve Consumer Commission. With respect to WebTV Networks, Inc.; Analysis To Aid System, October 26, 2000. Canadian agencies, the authority may be Public Comment Robert deV. Frierson, redelegated to individual Regional AGENCY: Federal Trade Commission. Associate Secretary of the Board. Directors on specific cases and projects ACTION: Proposed consent agreement. [FR Doc. 00–27958 Filed 10–30–00; 8:45 am] as appropriate. BILLING CODE 6210±01±P EFFECTIVE DATE: With respect to the SUMMARY: The consent agreement in this Australian Competition and Consumer matter settles alleged violations of Commission, the effective date of the Federal law prohibiting unfair or FEDERAL RESERVE SYSTEM delegation was July 17, 2000. With deceptive acts or practices or unfair methods of competition. The attached Sunshine Act Meeting respect to the Canadian agencies, the effective date of the delegation was Analysis to Aid Public Comment describes both the allegations in the AGENCY HOLDING THE MEETING: Board of October 24, 2000. Governors of the Federal Reserve draft complaint that accompanies the FOR FURTHER INFORMATION CONTACT: System. consent agreement and the terms of the Maneesha Mithal, Attorney, Division of consent order—embodied in the consent TIME AND DATE: 11:00 a.m., Monday, Planning and Information, (202) 326– agreement—that would settle these November 6, 2000. 2771, [email protected]. allegations. PLACE: Marriner S. Eccles Federal DATES: Reserve Board Building, 20th and C SUPPLEMENTARY INFORMATION: Notice is Comments must be received on Streets, N.W., Washington, D.C. 20551. hereby given, pursuant to or before November 24, 2000. ADDRESSES: Comments should be STATUS: Closed. Reorganization Plan No. 4 of 1961, 26 FR 6191, that the Commission has directed to: FTC/Office of the Secretary, MATTERS TO BE CONSIDERED: delegated to the Associate Director for Room 159, 600 Pennsylvania Ave., NW, 1. Personnel actions (appointments, Washington, D.C. 20580. promotions, assignments, Planning and Information the authority FOR FURTHER INFORMATION CONTACT: Joel reassignments, and salary actions) to disclose: (1) To Canadian law enforcement agencies, information Winston or Dean Forbes, FTC/S–4002, involving individual Federal Reserve 600 Pennsylvania Ave., NW, System employees. regarding consumer protection investigations involving Canadian Washington, D.C. 20580, (202) 326–3153 2. Any items carried forward from a or 326–2831. previously announced meeting. businesses or consumers; and (2) to the Australian Competition and Consumer SUPPLEMENTARY INFORMATION: Pursuant CONTACT PERSON FOR MORE INFORMATION: to Section 6(f) of the Federal Trade Lynn S. Fox, Assistant to the Board; Commission, information regarding consumer protection investigations Commission Act, 38 Stat. 721, 15 U.S.C. 202–452–3204. 46 and Section 2.34 of the Commission’s involving Australian businesses or SUPPLEMENTARY INFORMATION: You may Rules of Practice (16 CFR 2.34), notice consumers. With respect to Canada, the call 202–452–3206 beginning at is hereby given that the above-captioned approximately 5 p.m. two business days Associate Director can redelegate this consent agreement containing a consent before the meeting for a recorded authority to individual Regional order to cease and desist, having been announcement of bank and bank Directors on specific cases and projects filed with and accepted, subject to final holding company applications as appropriate. approval, by the Commission, has been scheduled for the meeting; or you may This delegation does not apply to placed on the public record for a period contact the Board’s Web site at http:// competition-related investigations. of thirty (30) days. The following www.federalreserve.gov for an When exercising its authority under this Analysis to Aid Public Comment electronic announcement that not only delegation, staff will require from the describes the terms of the consent lists applications, but also indicates relevant foreign law enforcement agency agreement, and the allegations in the procedural and other information about assurances of confidentiality. complaint. An electronic copy of the the meeting. Disclosures shall be made only to the full text of the consent agreement Dated: October 27, 2000. extent consistent with limitations on package can be obtained from the FTC Robert deV. Frierson, disclosure, including section 6(f) of the Homes Page (for October 25, 2000), on Associate Secretary of the Board. FTC Act, 15 U.S.C. 46(f), section 21 of the World Wide Web, at ‘‘http:// www.ftc.gov/os/2000/10/index.htm.’’ A [FR Doc. 00–28064 Filed 10–27–00; 3:40 pm] the Act, 15 U.S.C. 57b–2, and paper copy can be obtained from the BILLING CODE 6210±01±P Commission Rule 4.10(d), 16 CFR FTC Public Reference Room, Room H– 4.10(d), and with the Commission’s 130, 600 Pennsylvania Avenue, NW, enforcement policies and other Washington, D.C. 20580, either in FEDERAL TRADE COMMISSION important interests. Where the subject person or by calling (202) 326–3627. matter of the information to be shared Public comment is invited. Comments Delegation of Authority To Disclose raises significant policy concerns, staff should be directed to: FTC/Office of the Certain Nonpublic Information to shall consult with the Commission Secretary, Room 159, 600 Pennsylvania Foreign Law Enforcement Agencies before disclosing such information. Ave., NW, Washington, D.C. 20580. Two AGENCY: Federal Trade Commission. By direction of the Commission. paper copies of each comment should ACTION: Delegation of authority. Donald S. Clark, be filed, and should be accompanied, if possible, by a 31⁄2 inch diskette Secretary. SUMMARY: The Commission has containing an electronic copy of the delegated authority to the Associate [FR Doc. 00–27953 Filed 10–30–00; 8:45 am] comment. Such comments or views will Director of the Division of Planning and BILLING CODE 6750±01±M be considered by the Commission and
VerDate 112000 19:49 Oct 30, 2000 Jkt 194001 PO 00000 Frm 00025 Fmt 4703 Sfmt 4703 E:\FR\FM\31OCN1.SGM pfrm02 PsN: 31OCN1 Federal Register / Vol. 65, No. 211 / Tuesday, October 31, 2000 / Notices 64951 will be available for inspection and The complaint also alleges that, in have not been previously reimbursed; copying at its principal office in advertising the total cost of using the (c) canceled their subscription before accordance with Section 4.9(b)(6)(ii) of WebTV system, WNI failed to disclose April 1, 1999, and within ninety days of the Commission’s Rules of Practice (16 adequately that a significant percentage subscribing to the service; (d) identified CFR 4.9(b)(6)(ii)). of U.S. consumers will incur long toll charges as a reason for canceling; distance telephone toll charges while Analysis of Proposed Consent Order To and (e) provide proof of the charges. connected to the Internet through the Aid Public Comment Eligible subscribers may receive WebTV Internet service. The complaint reimbursement for toll charges incurred The Federal Trade Commission has alleges that this is a deceptive practice. in the first two months of their accepted, subject to final approval, an The proposed consent order contains subscription. subscribers who cannot agreement containing a consent order provisions designed to prevent WNI provide phone bills as proof of the from WebTV Networks, Inc. (‘‘WNI’’). from engaging in similar acts and charges would receive reimbursement The proposed consent order has been practices in the future. up to a maximum dollar amount, which placed on the public record for thirty Part I of the proposed order prohibits depends on the type of proof submitted. (30) days for receipt of comments by the three alleged false representations, Part VI of the proposed order requires interested persons. Comments received as well as any false representation WNI to notify its advertising agencies, during this period will become part of related to access to Internet content or manufacturers, and retailers to the public record. After thirty (30) days, functionality of any Internet access discontinue making any of the the Commission will again review the product or service. advertising claims prohibited by the agreement and the comments received, Part II of the proposed order prohibits order. WNI must also set up, staff, and and will decide whether it should WNI from making any representation refer consumers to a toll-free customer withdraw from the agreement or make about the cost of any Internet access service telephone number (or a similar final the agreement’s proposed order. product or service unless it discloses mechanism that is free to consumers) WNI advertises and promotes the certain material information. If using that would handle inquiries regarding WebTV system, consisting of a set-top such product or service to access the telephone toll charges. box and an Internet service which, Internet may result in telephone toll Part VII describes a consumer together, allows users to connect to the charges, this fact must be disclosed, education campaign that WNI must Internet through a telephone line and a clearly and conspicuously, along with undertake to inform consumers about television. WNI licenses the set-top box how consumers can determine whether the limitations of Internet access devices technology to various companies, they would be subject to these charges. as compared to computers. The including Sony, Philips Electronics, and Part III of the proposed order requires campaign will include one-half page Mitsubishi, which manufacture and sell that WNI make clear and conspicuous advertisements in three national the boxes. WNI sells the Internet service disclosures about long distance charges magazines, as well as a brochure that for a flat monthly fee. on a log-on screen, dialog box, or other WNI will (a) distribute to retailers similar device that appears prior to any This matter concerns allegedly false selling WebTV set-top boxes for posting Internet access product dialing a and deceptive advertising for the in the stores and (b) post on its Web site. WebTV system. The Commission’s telephone number for which there is a Parts VIII through XI of the proposed proposed complaint alleges that WNI toll charge. The disclosures must state order are reporting and compliance falsely claimed that: the following: (a) That the user will or • provisions. Part XII is a provision The WebTV system provides access will likely incur such a charge while ‘‘sunsetting’’ the order after twenty to all of the Internet’s content, including connected to the Internet access service; years, with certain exceptions. all of the entertainment and information (b) how the user can determine whether The purpose of this analysis is to available on the Internet. In fact, WebTV in fact (s)he will incur such a charge, facilitate public comment on the users are unable, for example, to access and the amount of the charge; and (c) a proposed order. It is not intended to files on Web sites that use popular source of information about means, if constitute an official interpretation of formats or programming languages, any, of avoiding the charge. Under this the agreement and proposed order or to including technologies for Web site provision, WNI must use a procedure modify in any way their terms. audio, video, interactivity, and designed to ensure that the user multimedia used for online expressly consents to connecting on a By direction of the Commission. entertainment and information toll basis, before a toll charge is Donald S. Clark, communication. incurred. Secretary. • The WebTV set-top box is Part IV of the proposed order requires [FR Doc. 00–27952 Filed 10–30–00; 8:45 am] equivalent to a personal computer with that WNI clearly and conspicuously BILLING CODE 6750±01±M respect to its Internet-related disclose in its Terms of Service and performance. In fact, in contrast to a introductory kit, or the equivalent computer, WebTV users are unable, for documents it provides to new GENERAL SERVICES example, to download, store, or run subscribers, that users may incur toll ADMINISTRATION software available on the Internet; charges while using the Internet service, display certain Web pages or play if that is the case, and how users can DEPARTMENT OF DEFENSE certain Web pages or play certain Web determine whether they would incur files; or open email attachments in these charges. Office of Communications; certain common formats. Part V of the proposed order requires Cancellation of a Optional Form • WNI’s upgrades to the WebTV that WNI offer reimbursement to certain AGENCY: General Services system keep users current with the former subscribers to its Internet service Administration DoD. latest Internet technology. In fact, those for toll charges they incurred. ACTION: Notice. upgrades have failed to provide certain Subscribers eligible for reimbursement commonly used Internet technologies are those who: (a) Incurred toll charges SUMMARY: The Department of Defense for audio, video, interactivity, and before March 1, 1999, and within sixty cancelled the following Optional Form multimedia. days of subscribing to the service; (b) because of low usage:
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OF 87A, Attention—Electrostatic INDIVIDUALS COVERED BY THE SYSTEM: d. To the Office of Personnel Sensitive Devices (Label) The system will include those Management (OPM) or the General DATES: Effective October 31, 2000. individuals who request to be added to Accounting Office when the information GSA bidders’ mailing lists, register to is required for evaluation of the FOR FURTHER INFORMATION CONTACT: Ms. bid on GSA sales, and enter into program. Barbara Williams, General Services contracts to buy Federal personal e. To a Member of Congress or his or Administration, (202) 501–0581. property at sales conducted by GSA. her staff on behalf of and at the request Dated: October 10, 2000. of the individual who is the subject of Barbara M. Williams, RECORDS IN THE SYSTEM: the record. Deputy Standard and Optional Forms The system contains information f. To an expert, consultant, or Management Officer. needed to identify potential and actual contractor of GSA in the performance of [FR Doc. 00–27908 Filed 10–30–00; 8:45 am] bidders and awardees, and transaction a Federal duty to which the information is relevant. BILLING CODE 6820±34±M information involving personal property sales. System records include: g. To the GSA Office of Finance for a. Personal information provided by debt collection purposes (see GSA/ GENERAL SERVICES bidders and buyers, including names, PPFM–7). ADMINISTRATION phone numbers, addresses, Social h. To the National Archives and Security Numbers, and credit card Records Administration (NARA) for Privacy Act of 1974; System of numbers or other banking information; records management inspection Records and conducted under 44 U.S.C. 2904 and b. Contract information on Federal 2906. AGENCY: General Services personal property sales, including POLICIES AND PRACTICES FOR STORING, Administration. whether payment was received, the RETRIEVING, ACCESSING, RETAINING, AND ACTION: Notice of a new system of form of the payment, notices of default, DISPOSING OF SYSTEM RECORDS: records subject to the Privacy Act of and contract claim information. STORAGE: 1974. AUTHORITY FOR MAINTAINING THE SYSTEM: Information may be collected on paper or electronically and may be SUMMARY: The General Service Sections 201 and 203 of the Federal Administration (GSA) is providing stored on paper or on electronic media, Property and Administrative Services as appropriate. notice of the establishment of a new Act of 1949, as amended (40 U.S.C. 481 system of records, Personal Property and 484), which assign responsibility RETRIEVABILITY: Sales Program (GSA/FSS–13). The new for the disposition of property to the Records are retrievable by a personal system will collect information for use Administrator of General Services. identifier or by other appropriate type of in soliciting bids and awarding designation approved by GSA. contracts on sales of Federal personal PURPOSE(S): property. Information in the system will To establish and maintain a system of SAFEGUARDS: be provided voluntarily by individuals records for conducting public sales of System records are safeguarded in who wish to buy Federal personal Federal personal property by GSA. accordance with the requirements of the property through sales and auctions Privacy Act, the Computer Security Act, conducted by GSA. ROUTINE USES OF THE SYSTEM RECORDS, and OMB Circular A–130. Technical, INCLUDING CATEGORIES OF USERS AND THEIR administrative, and personnel security DATES: Comments on the new system PURPOSES FOR USING THE SYSTEM: measures are implemented to ensure must be provided November 30, 2000. System information may be accessed confidentiality and integrity of the The new system will become effective and used by authorized GSA employees system data stored, processed, and without further notice on November 30, or contractors to prepare for and transmitted. Paper records are stored in 2000 unless comments dictate conduct personal property sales, secure cabinets or rooms. Electronic otherwise. administer sales contracts, perform records are protected by passwords and ADDRESSES: Address comments to: oversight or maintenance of the GSA other appropriate security measures. Director, Personal Property Division electronic systems and, when necessary, RETENTION AND DISPOSAL: (FBP), Federal Supply Service, General for sales contract litigation or non- Services Administration, 1941 Jefferson procurement suspension or debarment Disposition of records is according to Davis Highway, Crystal Mall Building 4, purposes. the National Archives and Records Arlington, VA 22202. Information from this system also may Administration (NARA) guidelines, as be disclosed as a routine use: set forth in the handbook, GSA Records FOR FURTHER INFORMATION CONTACT: a. In any legal proceeding, where Maintenance and Disposition System Personal Property Division, Federal pertinent, to which GSA is a party (OAD P 1820.2), and authorized GSA Supply Service, at the above address, or before a court or administrative body. records schedules. telephone (703) 305–7240. b. To a Federal, State, local, or foreign SYSTEM MANAGER AND ADDRESS: GSA/FSS±13 agency responsible for investigating, Director, Personal Property Division prosecuting, enforcing, or carrying out a SYSTEM NAME: (FBP), Federal Supply Service, General statute, rule, regulation, or order when Services Administration, 1941 Jefferson Personal Property Sales Program. GSA becomes aware of a violation or Davis Highway, Crystal Mall Building 4, potential violation of civil or criminal Arlington VA 22202. SYSTEM LOCATION: law or regulation. System records are maintained by the c. To duly authorized officials NOTIFICATION PROCEDURE: General Services Administration (GSA) engaged in investigating or settling a Individuals may submit a request on at several locations. A complete list of grievance, complaint, or appeal filed by whether a system contains records about the locations is available from the an individual who is the subject of the them to the system manager at the above System Manager. record. address.
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RECORD ACCESS PROCEDURES: Affairs (OPA) collects annual data from and public health assessments at DOE Requests from individuals for access Title X grantees to assure compliance sites listed on, or proposed for, the to their records should be addressed to with legislative and regulatory Superfund National Priorities List and the system manager. requirements and identify areas where at sites that are the subject of petitions grantees may require assistance. from the public; and other health- CONTESTING RECORD PROCEDURES: Respondents: Title X Family Planning related activities such as epidemiologic GSA rules for access to systems of Program Grantees; Annual Number of studies, health surveillance, exposure records, contesting the contents of Respondents: 85; Average Burden per and disease registries, health education, systems of records, and appealing initial Response: 22 hours; Total Burden: 1,870 determinations are published in the substance-specific applied research, hours. emergency response, and preparation of Federal Register, 41 CFR part 105–64. Send comments to Cynthia Agens toxicological profiles. In addition, under Bauer, OS Reports Clearance Officer, RECORD SOURCE CATEGORIES: an MOU signed in December 1990 with Room 503H, Humphrey Building, 200 Information is provided by DOE and replaced by an MOU signed in Independence Avenue, SW., individuals who wish to participate in Washington, DC 20201. Written 1996, the Department of Health and the GSA personal property sales comments should be received within 60 Human Services (HHS) has been given program, and system transactions days of this notice. the responsibility and resources for designed to gather and maintain data conducting analytic epidemiologic and to manage and evaluate the Federal Dated: October 19, 2000. investigations of residents of personal property disposal program. Dennis P. Williams, communities in the vicinity of DOE Dated: October 18, 2000. Deputy Assistant Secretary, Budget. facilities, workers at DOE facilities, and Daniel K. Cooper, [FR Doc. 00–27834 Filed 10–30–00; 8:45 am] other persons potentially exposed to Director, Information Management Division. BILLING CODE 4150±34±M radiation or to potential hazards from [FR Doc. 00–27909 Filed 10–30–00; 8:45 am] non-nuclear energy production and use. HHS has delegated program BILLING CODE 6820±34±M DEPARTMENT OF HEALTH AND responsibility to CDC. HUMAN SERVICES Purpose: This subcommittee is DEPARTMENT OF HEALTH AND Agency for Toxic Substances and charged with providing advice and HUMAN SERVICES Disease Registry recommendations to the Director, CDC, and the Administrator, ATSDR, Office of the Secretary Citizens Advisory Committee on Public pertaining to CDC’s and ATSDR’s public Health Service (PHS) Activities and health activities and research at this Agency Information Collection Research at Department of Energy DOE site. Activities shall focus on Activities: Proposed Collections; (DOE) Sites: Oak Ridge Reservation providing the public with a vehicle to Comment Request Health Effects Subcommittee express concerns and provide advice The Department of Health and Human In accordance with section 10(a)(2) of and recommendations to CDC and Services, Office of the Secretary will the Federal Advisory Committee Act ATSDR. The purpose of this meeting is periodically publish summaries of (P.L. 92–463), the Agency for Toxic to receive updates from ATSDR and proposed information collections Substances and Disease Registry CDC, and to address other issues and projects and solicit public comments in (ATSDR) and the Centers for Disease topics, as necessary. compliance with the requirements of Control and Prevention (CDC) announce Matters to be Discussed: Agenda items section 3506(c)(2)(A) of the Paperwork the following meeting. Reduction Act of 1995. To request more Name: Citizens Advisory Committee include a presentation and discussion information on the project or to obtain on PHS Activities and Research at DOE on the purpose, function, and structure a copy of the information collection Sites: Oak Ridge Reservation Health of the Subcommittee, discussion on plans and instruments, call the OS Effects Subcommittee (ORRHES). defining operational guidelines, and Reports Clearance Officer on (202) 690– Times and Dates: agency updates. Agenda items are 6207. 8 a.m.–5 p.m., November 16, 2000 subject to change as priorities dictate. Comments are invited on: (a) Whether 8 a.m.–5 p.m., November 17, 2000 Contact Persons for More Information: the proposed collection of information Place: YWCA, 1660 Oak Ridge Loretta Bush, Executive Secretary is necessary for the proper performance Turnpike, Oak Ridge, Tennessee, 37830. ORRHES, or Marilyn Palmer, Committee of the functions of the agency, including Telephone 865/482–9922. Management Specialist, Division of whether the information shall have Status: Open to the public, limited practical utility; (b) the accuracy of the only by the space available. The meeting Health Assessment and Consultation, agency’s estimate of the burden of the room accommodates approximately 150 ATSDR, 1600 Clifton Road, NE, M/S E– proposed collection of information; (c) people. 56, Atlanta, Georgia 30333, telephone 1– ways to enhance the quality, utility and Background: Under a Memorandum 888–42–ATSDR(28737), fax 404/639– clarity of the information to be of Understanding (MOU) signed in 6075. collected; and (d) ways to minimize the October 1990 and renewed in November The Director, Management Analysis burden of the collection of information 1992 between ATSDR and DOE. The and Services Office, has been delegated on respondents, including through the MOU delineates the responsibilities and the authority to sign Federal Register use of automated collection techniques procedures for ATSDR’s public health notices pertaining to announcements of or other forms of information activities at DOE sites required under meetings and other committee technology. sections 104, 105, 107, and 120 of the management activities, for both the Proposed Projects 1. Annual Report Comprehensive Environmental Centers for Disease Control and for OPA Title X Family Planning Response, Compensation, and Liability Prevention and the Agency for Toxic Program Grantees—0990–0221— Act (CERCLA or ‘‘Superfund’’). These Substances and Disease Registry. Revision—The Office of Population activities include health consultations
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Dated: October 25, 2000. I. Fluoroquinolones Approved for as defined in section 201(v) of the act Carolyn J. Russell, Poultry Use (21 U.S.C. 321(v)). As such, the drug Director, Management Analysis and Services The following are approved uses for cannot be legally marketed in interstate Office, Centers for Disease Control and fluoroquinolones in poultry: commerce in the absence of an Prevention. approved NADA (sections 301, 501, and [FR Doc. 00–27871 Filed 10–30–00; 8:45 am] A. Sarafloxacin Hydrochloride 512 of the act (21 U.S.C. 331, 351, and BILLING CODE 4163±70±P NADA 141–017, SaraFlox WSP, 360b)). The requirements for approval of approved August 18, 1995, for the NADA’s are set out in section 512 of the control of mortality in growing turkeys act. Section 512 of the act requires that DEPARTMENT OF HEALTH AND and broiler chickens associated with a new animal drug must be shown to be HUMAN SERVICES Escherichia coli organisms, Abbott safe and effective for its intended uses. Laboratories, 1401 Sheridan Rd., North Section 201(u) of the act provides that Food and Drug Administration Chicago, IL 60064. ‘‘safe’’ as used in section 512 ‘‘has [Docket No. 00N±1571] NADA 141–018, SaraFlox Injection, reference to the health of man or approved October 12, 1995, for the animal.’’ The determination of safety Enrofloxacin for Poultry; Opportunity control of early chick mortality requires CVM to consider, among other For Hearing associated with E. coli organisms in relevant factors, ‘‘the probable chickens and turkeys, Abbott consumption of such drug and of any AGENCY: Food and Drug Administration, Laboratories, 1401 Sheridan Rd., North substance formed in or on food because HHS. Chicago, IL 60064. of the use of such drug’’ (section ACTION: Notice. 512(d)(2)(A)). Accordingly, CVM must B. Enrofloxacin consider not only safety of the new SUMMARY: The Food and Drug NADA 140–828, Baytril 3.23% animal drug to the target animal but also Administration (FDA), Center for Concentrate Antimicrobial Solution, safety to humans of substances formed Veterinary Medicine (CVM), is approved October 4, 1996, for the in or on food as a result of the use of proposing to withdraw approval of the control of mortality in chickens the new animal drug. new animal drug application (NADA) associated with E. coli organisms and FDA approved the NADA’s for for use of the fluoroquinolone control of mortality in turkeys fluoroquinolones for use in poultry in enrofloxacin in poultry. This action is associated with E. coli and Pasteurella 1995 and 1996 (see section V.A.3 of this based on CVM’s determinations that the multocida organisms, Bayer Corp., document). After the approvals, CVM use of fluoroquinolones in poultry Agriculture Division, Animal Health, instituted several strategies intended to causes the development of Shawnee Mission, KS 66201. prevent or mitigate the development of fluoroquinolone-resistant Abbott Laboratories has requested resistance (see section V.A.4 of this Campylobacter, a human pathogen, in withdrawal of NADA’s 141–017 and document). However, resistance still poultry; this resistant Campylobacter is 141–018 for use of sarafloxacin quickly developed to the transferred to humans and is a hydrochloride in poultry. By doing so, fluoroquinolones among the human significant cause of the development of the company has waived its right to a foodborne pathogen, Campylobacter resistant Campylobacter infections in hearing. Therefore, only NADA 140–828 (see section V.B of this document). The humans; and resistant Campylobacter is covered by this notice. resistance developed from use of infections are a human health hazard. fluoroquinolones in poultry under the Therefore, CVM is proposing to II. Summary of the Bases for Withdrawing the Approval approved, labeled conditions of use (see withdraw the approval of the new section V.B.1 of this document). animal drug application for use of CVM is providing notice of an By 1998, Centers for Disease Control enrofloxacin in poultry on the grounds opportunity for a hearing on a proposal and Prevention (CDC) testing found that that new evidence shows that the to withdraw approval of the NADA for 13.6 percent of Campylobacter human product has not been shown to be safe enrofloxacin for use in poultry and to isolates were resistant to as provided for in the Federal Food, revoke the new animal drug regulations fluoroquinolones. Fluoroquinolone Drug, and Cosmetic Act (the act). reflecting the approval of the NADA (21 resistance rose to 17.6 percent among DATES: Submit written appearances and CFR 520.813). Enrofloxacin belongs to Campylobacter jejuni and 30 percent a request for a hearing by November 30, the class of antimicrobial drugs called among Campylobacter coli isolated from 2000. Submit all data and analysis upon fluoroquinolones. Fluoroquinolones ill humans in 1999. In 1998, testing which a request for a hearing relies by also are approved for use in humans. established that approximately 9.4 January 2, 2001. Fluoroquinolones are considered to be percent of the C. jejuni isolated from ADDRESSES: Written appearances, one of the most valuable antimicrobial chicken carcasses at federally inspected requests for a hearing, data and analysis, drug classes available to treat human slaughter plants in the United States and other comments are to be identified infections because of their spectrum of were fluoroquinolone resistant. Higher with Docket No. 00N–1571 and must be activity, pharmacodynamics, safety and levels of fluoroquinolone resistance are submitted to the Dockets Management ease of administration. This class of observed in retail chicken (see section Branch (HFA–305), Food and Drug drugs is effective against a wide range V.B of this document). After thoroughly analyzing all the Administration, 5630 Fishers Lane, rm. of human diseases and is used both in data and evidence, CVM has determined 1061, Rockville, MD 20852. treatment and prophylaxis of bacterial infections in the community and in the following: The primary cause of the FOR FURTHER INFORMATION CONTACT: hospitals. Fluoroquinolones are emergence of domestically-acquired Linda R. Tollefson, Center for essential to the treatment of foodborne fluoroquinolone-resistant Veterinary Medicine (HFV–200), Food diseases. These diseases have a major Campylobacter infections in humans is and Drug Administration, 7500 Standish public health impact in the United the consumption of or contact with Pl., Rockville, MD 20855, 301–827– States. contaminated food (see section IV.B of 6647. Enrofloxacin oral solution for each of this document). Moreover, poultry is the SUPPLEMENTARY INFORMATION: its uses in poultry is a new animal drug most likely source of campylobacteriosis
VerDate 112000 19:49 Oct 30, 2000 Jkt 194001 PO 00000 Frm 00029 Fmt 4703 Sfmt 4703 E:\FR\FM\31OCN1.SGM pfrm02 PsN: 31OCN1 Federal Register / Vol. 65, No. 211 / Tuesday, October 31, 2000 / Notices 64955 in humans (see section V.C.2 of this not plausibly due to fluoroquinolone CVM believes that the adverse human document), poultry is also a source of use in humans or the spread of resistant health effects were underestimated due fluroquinolone-resistant Campylobacter Campylobacter from one human to to limitations in study methods and (see sections V.B.3 and V.B.4 of this another. data. document), and administration of Development of resistance to Finally, CVM is concerned that the fluoroquinolones to chickens leads to fluoroquinolones among Campylobacter harm from fluoroquinolone-resistant development of fluoroquinolone- has important consequences for human Campylobacter infections will continue resistant Campylobacter in chickens. health (see section V.C of this to increase such that more people will CVM has concluded, based on data document). Foodborne diseases have a be unable to be effectively treated with from surveillance programs, published major public health impact in the fluoroquinolones when those drugs are literature and other sources, that the use United States, and Campylobacter is the needed for foodborne illness. With of fluoroquinolones in poultry is a most common known cause of respect to the harm presented by significant cause of fluoroquinolone- foodborne illness in the United States resistant foodborne pathogens, it is resistant Campylobacter on poultry (Ref. 3). Fluoroquinolones are especially important to take action as carcasses, and therefore a significant considered to be one of the most soon as a problem is detected since the cause of fluoroquinolone-resistant valuable antimicrobial drug classes nature of the problem is dynamic and Campylobacter infections in humans. available to treat a wide variety of relatively large shifts in the prevalence CVM’s conclusion is supported by data human infections, including infections of resistance can occur within short establishing a temporal association resistant to other drugs, and have been timeframes (Refs. 5 and 6). between the approvals of these drugs for particularly important in the treatment III. Legal Context of the Proposed use in poultry in the United States and of foodborne infections. Action the increase in resistant Campylobacter Patients with severe enteric disease infections in humans. Fluoroquinolones such as campylobacteriosis are usually Section 512(e)(1)(B) of the act, have been available for human use since treated empirically. Therefore, requires withdrawal of approval of an 1986 and are commonly prescribed for Campylobacter resistance presents a NADA if: persons with gastrointestinal illness. Yet dilemma for the physician. If * * * new evidence not contained in resistance to fluoroquinolones did not fluoroquinolone treatment is given [an approved] application or not increase among Campylobacter based on symptoms, and the patient is available to the Secretary until after organisms above a very low level until infected with resistant Campylobacter, such application was approved, or tests 1996 or 1997, or soon after the approval there is a risk that the treatment will not by new methods, or tests by methods and use of these drugs in poultry (see be effective or will be less effective and not deemed reasonably applicable when section V.B.5 of this document). valuable time will be lost. If treatment such application was approved, CVM’s conclusion is also supported is delayed until the causative organism evaluated together with the evidence by comparison of fluoroquinolone use and susceptibility are confirmed by a available to the Secretary when the in poultry with the two most likely medical laboratory, again valuable time application was approved, shows that other possible causes of will be lost. That is, the disease may be such drug is not shown to be safe for use fluoroquinolone-resistant human prolonged or result in complications, under the conditions of use upon the infections—exposure to resistant especially in vulnerable patients with basis of which the application was Campylobacter during foreign travel, underlying health problems (Refs. 1 and approved * * *. and direct use of fluoroquinolones in 4). Use of an alternative drug to treat the Under this clause, to meet its initial humans. People are exposed to patient empirically may be less burden to support withdrawal of an fluoroquinolone-resistant desirable because that drug may have a approval CVM must provide ‘‘a Campylobacter during travel to narrower spectrum of activity or greater reasonable basis from which serious developing countries (Ref. 1). However, or more toxic side effects. questions about the ultimate safety of a risk assessment conducted by CVM Isolation of fluoroquinolone-resistant [the drug] may be inferred.’’ See (see section V.C.3 of this document) Campylobacter organisms from humans Diethylstilbestrol: Withdrawal of demonstrates an unacceptable human means that fluoroquinolone therapy—if Approval of New Animal Drug health impact from domestically- administered—would be ineffective or Applications; Commissioner’s Decision acquired Campylobacter infections from less effective in these humans. The (Commissioner’s DES Decision), 44 FR use of fluoroquinolones in chickens current level of resistance to 54852 at 54861, September 21, 1979, (Ref. 2). These domestically acquired fluoroquinolones among human aff’d Rhone-Poulenc, Inc., Hess & Clark infections are much more likely to come Campylobacter isolates attributed to the Div. v. FDA, 636 F.2d 750 (D.C. Cir from exposure to resistant use of fluoroquinolones in poultry 1980). See also Nitrofurans: Withdrawal Campylobacter through food than as a represents a harm to human health. of Approval of New Animal Drug result of direct treatment with Furthermore, a risk assessment Applications; Final Rule; Final Decision fluoroquinolones in humans (see section conducted by CVM demonstrated the Following a Formal Evidentiary Public IV.B of this document). This is due in magnitude of the adverse impact that Hearing, 56 FR 41902, August 23, 1991. part to the fact that even if the use of fluoroquinolones in chickens ‘‘‘Serious questions’ can be raised where fluoroquinolone treatment results in has on human health. The risk the evidence is not conclusive, but resistant Campylobacter in an assessment determined that in 1999 a merely suggestive of an adverse effect’’ individual, the resistant organisms are mean estimate of 11,477 persons (5th (44 FR 54861). Once this threshold unlikely to be transmitted to other and 95th percentiles: 6,412 and 18,978) burden has been satisfied, the burden people in the United States because infected with campylobacteriosis and passes to the sponsor to demonstrate generally the numbers of organisms prescribed a fluoroquinolone would safety. Id. present are low and fecal-oral have had a fluoroquinolone-resistant Section 201(u) of the act provides that transmission is required (Ref. 3). illness due to the use of for purposes of section 512 of the act, Therefore, the level of fluoroquinolone- fluoroquinolones in chickens. These ‘‘safe’’ has ‘‘reference to the health of resistant Campylobacter now seen in people are likely to have had prolonged man or animals.’’ In determining human isolates in the United States is illnesses or complications. Furthermore, whether a drug is ‘‘safe,’’ section
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512(d)(2)(A) of the act requires FDA to bacteria that have developed resistance C. Role of Animal Drug Use in the consider ‘‘the probable consumption of are disease causing (pathogenic) in Development of Resistant Foodborne such drug and any substance formed in humans, they may cause disease Pathogens or on food because of the use of such resistant to treatment (Refs. 7 and 9). Scientific evidence demonstrates that drug.’’ Selective pressure resulting from the the use of antimicrobials in food- ‘‘Safe,’’ in the context of human food use of antimicrobial drugs is the producing animals can select for safety, can be defined as ‘‘reasonable underlying force in the development resistant bacteria of human health certainty of no harm.’’ The definition is concern. Repeated dosing of food- derived from language in H. Rept. 2284, and spread of resistant bacterial populations. The association between producing animals can also contribute 85th Cong., 2d. sess. 4095, 1958, to the selection of resistant bacteria defining the term ‘‘safe’’ as it appears in antimicrobial use and resistance has been documented in various settings (Refs. 27 and 28). When an section 409 of the act (21 U.S.C. 348), antimicrobial drug is administered to an which governs food additives. (Ref. 7), for nosocomial infections (Ref. 10) as well as for community-acquired animal, the most susceptible bacteria Substances formed in or on food due to will be eliminated, while the least infections (Ref. 11). the use of animal drugs were regulated susceptible organisms will survive. under the food additive provisions in B. Antimicrobial Resistance in These surviving bacteria will proliferate section 409 of the act until passage of Foodborne Pathogens of Animal Origin and become the predominant the Animal Drug Amendments in 1968 population. With additional exposure to (the 1968 amendments). The 1968 In industrialized countries, the major the drug, the resistant populations of amendments merely consolidated all of foodborne pathogens, Campylobacter bacteria will expand and have an the existing statutory authorities related and Salmonella, are infrequently increasing probability of survival and to animal drugs into section 512 of the transferred from person to person (Refs. dissemination. act, and the legislative history shows 3 and 12). In these countries, The resistant bacteria that develop as that the consolidation in no way epidemiological data have demonstrated a result of antimicrobial drug use in changed the authorities with respect to that the primary source of antibiotic food-producing animals can then be the regulation of new animal drugs (S. resistant foodborne infections in transferred to humans via food. The Rept. 1308, 90th Cong., 2d. sess. 1, humans is the acquisition of resistant contaminated food may cause disease in 1968). CVM has applied the ‘‘reasonable persons handling or consuming the food certainty of no harm’’ standard in bacteria from animals via food (Refs. 3, 13, and 14). This has been demonstrated or in persons consuming food determining the safety of substances contaminated from the animal-derived formed in or on food as a result of the through several different types of foodborne disease followup food. use of a new animal drug during the When antimicrobial drugs are new animal drug application review investigations, including laboratory surveillance, molecular subtyping, administered to food-producing process. CVM has done so by animals, they promote the emergence of determining the level at which a outbreak investigations, and studies on infectious dose and carriage rates (Refs. resistance in bacteria that may not be substance formed in or on food as a pathogenic to the animal, but are 15, 16, 17, and 18). result of the use of a new animal drug pathogenic to humans (Refs. 15, 29, 30, has no effect on humans (Ref. 75). CDC published an extensive review of 31, and 32). For example, Salmonella IV. Development of Antimicrobial epidemiological studies that focused on and Campylobacter are ubiquitous and Resistance As a Result of Drug Use in human foodborne infections caused by can exist in the intestinal flora of Animals drug-resistant Salmonella and various food-producing animals without concluded that the resistant infections causing disease in the animals. A. Development of Antimicrobial were acquired through contaminated However, these bacteria can cause Resistance That Can Compromise foods of animal origin (Refs. 12 and 19). severe, even fatal, foodborne illness in Human Therapy Transfer of Campylobacter from poultry humans. If using an antimicrobial in a Antimicrobial drugs are products that to humans through food was food-producing animal causes resistance affect bacteria by inhibiting their growth demonstrated as early as 1984 (Ref. 15). to occur in such bacteria, and the or by killing them outright. Recent emergence of a resistant resistant bacteria cause an illness in a Antimicrobial drugs are used to treat foodborne pathogen that has a food- consumer who needs treatment, that bacterial disease in humans and since producing animal reservoir is illustrated treatment may be compromised (Ref.9). their discovery have prevented The link between antimicrobial by Salmonella enterica serotype countless deaths worldwide. In animals, resistance in foodborne pathogenic Typhimurium Definitive Type 104 these drugs are used to control, prevent, bacteria and use of antimicrobials in (DT104). DT104 is a multidrug resistant and treat infection, and to enhance food-producing animals has been pathogen that is currently epidemic in animal growth and feed efficiency. demonstrated in a number of studies That antimicrobial agents could select human and food-producing animal (Refs. 25, 33, 34, and 35). For example, for resistant bacterial populations populations in the United Kingdom and an association has been noted between became apparent soon after the first has been isolated in several countries in loss of susceptibility to antimicrobial drug, penicillin, was Europe (Refs. 20, 21, and 22). This fluoroquinolones among Salmonella discovered. Antimicrobial use promotes organism has also been identified in enterica Typhimurium DT104 isolates antimicrobial resistance by selecting for livestock and poultry in the United (see section IV.B of this document) and resistant bacteria (Refs. 7 and 8). When States (Refs. 23, 24, and 25). Also, a the approval and use of a an antimicrobial drug is used to treat an report from the United Kingdom fluoroquinolone for veterinary infection, the bacteria most sensitive to suggests that infections caused by therapeutic use in the United Kingdom the drug die or are inhibited. Those DT104 may be associated with greater (Refs. 14, 30, and 36). Moreover, bacteria that have, or acquire, the ability morbidity and mortality than infections fluoroquinolone administration to to resist the antimicrobial persist and by less resistant serotypes of Salmonella chickens infected with fluoqouinolone- replace the sensitive bacteria. If these (Ref. 26). sensitive C. jejuni has been shown to
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Epidemiological evidence shows that to all other fluoroquinolones, including Administering fluoroquinolones to large resistant foodborne pathogens are ciprofloxacin and other numbers of animals through water or present on or within animals as a result fluoroquinolones used only in humans. feed could substantially increase the of antimicrobial drug use in food- The veterinary fluoroquinolone selective pressure on the organisms and producing animals and can result in enrofloxacin is structurally similar to facilitate the spread of resistant drug-resistant infections in humans ciprofloxacin and a portion of it is pathogens. An additional problem arises (Refs. 1, 16, 37, 38, and 39). Holmberg metabolized to ciprofloxacin in the when the dose administered to each et al. were the first to establish this by animal (Ref. 41). bird is variable, which is the case when documenting an outbreak of Second, reports of studies conducted the antimicrobial is administered ad salmonellosis in people caused by after approvals of fluoroquinolones for libitum in the water. This practice may multi-drug-resistant Salmonella from poultry in other countries had shown a result in ineffective dosing in some eating hamburger originating from relationship between the approval of animals and increase the probability of South Dakota beef cattle fed the fluoroquinolones for therapeutic use in selecting for resistant zoonotic bacteria antibiotic chlortetracycline for growth food-producing animals and the in both healthy and diseased animals. development of fluoroquinolone promotion (Ref. 16). As explained more 2. Advisory Committee Review fully in section V.B of this document, resistance in Campylobacter in animals researchers in Minnesota recently and humans. For example, the approval Because of the concerns surrounding reported on fluoroquinolone-resistant and use of these drugs in poultry in the the use of fluoroquinolones in food- Campylobacter infections in humans Netherlands (Refs. 33, 35, and 42), and producing animals, CVM consulted with acquired from poultry treated with Spain (Refs. 43 and 44) preceded a panel of experts comprised of its fluoroquinolones (Ref. 1). increases in fluoroquinolone resistance Veterinary Medicine Advisory in Campylobacter isolates from treated Committee and FDA’s [Human] Anti- V. Antimicrobial Resistance Resulting animals and ill humans. In the Infective Drug Advisory Committee in From the Use of Fluoroquinolones in Netherlands, Campylobacter isolates May 1994 to address the issue of use of Poultry from humans and poultry were fluoroquinolones in food-producing As discussed below, during its examined for resistance to the human animals in light of concerns about evaluation of the NADA’s for use of fluoroquinolone ciprofloxacin between antimicrobial resistance. The panel fluoroquinolones in poultry, CVM the years 1982 and 1989 to determine supported several restrictions on the use carefully considered the issue of the influence of licensing of of the drugs in food-producing animals potential resistance development due to enrofloxacin for veterinary use in 1987 in order to minimize the human health the use of the drugs in poultry. When (Ref. 33). In 1982, none of the risks related to the development of CVM approved the NADA’s for use of Campylobacter isolates from either resistant bacteria in animals (Ref. 45). fluoroquinolones in poultry, it believed human or poultry sources was resistant Frequently expressed recommendations that the fluoroquinolones could be used to ciprofloxacin. In 1989, of committee members included safely in poultry and that resistance fluoroquinolone resistance among the approval for therapeutic use by development could be limited by certain Campylobacter isolates was 11 percent veterinary prescription only, prohibition restrictions placed on the use of the in humans and 14 percent in poultry of extra-label use, and establishment of drugs. Resistance, however, has (Ref. 33). a nationally representative surveillance developed such that CVM now believes Third, there was a concern about use system to prospectively monitor that its only option to protect human of fluoroquinolones as water-soluble resistance trends of selected enteric health is withdrawal of the approval of products. This use raised the possibility bacteria of animals that can cause the NADA’s for use of fluoroquinolones of development of resistant organisms in disease in humans (Ref. 45). in poultry. greater numbers than if the drugs were to be administered in an individually 3. Approval of Enrofloxacin A. Circumstances Surrounding the administered injectable dosage form. The NADA for Baytril 3.23% Approval Due to the nature of animal production, Concentrate Antimicrobial Solution the most efficient way to treat herds or (enrofloxacin) was approved October 4, 1. Human Health Concern Related to flocks is to administer drugs through the 1996, for broiler chickens and growing Fluoroquinolone Resistance water supply or the feed. When disease turkeys. The approval is for therapeutic Prior to FDA’s approval of is detected in a herd of animals or a use: Enrofloxacin is approved for the fluoroquinolones for use in food- flock of poultry, the product is put into control of mortality in chickens producing animals, several scientific the animals’ water supply, thereby associated with E. coli organisms and organizations and individual scientists exposing greater numbers of animals control of mortality in turkeys expressed concern that the use of than just the few with clinical signs of associated with E. coli and P. multocida fluoroquinolones in food-producing the disease. The practice of treating an organisms. animals would result in the selection of entire herd or flock is more likely to At the time this drug was approved, fluoroquinolone-resistant foodborne result in resistant pathogens than microbial safety studies were not bacterial pathogens in humans (Refs. 7, individual animal treatment due to the required for therapeutic uses of 33, and 40). There were several reasons inability to control each animal’s dose antimicrobial new animal drugs in food- for these concerns. and the widespread contamination by producing animals. Thus, no studies First, as explained more fully in water leakage and animal waste that were required of the drug sponsor, and section V.C of this document, occurs when large numbers of animals none was performed, demonstrating the fluoroquinolones are very important for are treated, which result in untreated safety of the use of fluoroquinolones in human therapy. Bacteria resistant to animals being exposed to the drug. poultry with respect to antimicrobial veterinary fluoroquinolones exhibit Selective pressure exerted by resistance and the potential for resistant resistance to other compounds within fluoroquinolone use is the driving force pathogens to be transferred from poultry
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Human isolate fluoroquinolones, CVM has found very However, increasing evidence that testing is conducted at the CDC National little evidence of extra-label use of these therapeutic as well as subtherapeutic Center for Infectious Diseases drugs in food-producing animals, based use of antimicrobials in food-producing Foodborne Disease Laboratory. Goals on information derived from regulatory animals may select for resistant bacteria and objectives of the monitoring inspections. Nor has CVM found of human health concern led the agency program include: Providing descriptive evidence of over-the-counter sales of the to issue final guidance addressing this data on the extent and temporal trends poultry fluoroquinolones. Therefore, the concern in December 1999 (Ref. 46). The of antimicrobial susceptibility in enteric agency’s attempts to prevent the guidance addresses how FDA intends to organisms from the human and animal development of fluoroquinolone- consider the potential human health populations; providing information to resistant human pathogens through impact of all uses, therapeutic as well as veterinarians, physicians, and public limiting these drugs to prescription use subtherapeutic, of all classes of health authorities so that timely action and by prohibiting extra-label use have antimicrobial new animal drugs can be taken; prolonging the life span of not been sufficient. intended for use in food-producing approved drugs by promoting the 2. Human Isolate Data from NARMS animals. The guidance states that prudent use of antimicrobials; preapproval studies to answer questions identifying areas for more detailed CDC began routinely testing human regarding the human health impact of investigation; and guiding research on Campylobacter isolates for resistance to the microbiological effects of an antimicrobial resistance. fluoroquinolones in 1998, 2 years after antimicrobial product may be needed Third, CVM has supported efforts by approval of enrofloxacin for use in for therapeutic as well as subtherapeutic the American Veterinary Medical poultry. In 1998, CDC tested 346 human products (Ref. 46). Association (AVMA) and several Campylobacter isolates and found 13.6 practitioner and producer groups to percent of the Campylobacter isolates 4. Approval Restrictions, Surveillance, were resistant to fluoroquinolones (Ref. and Educational Activities define and promote the appropriate use of antimicrobial drugs in food- 48). In 1999, CDC tested 315 human Certain actions were taken at or near producing animals to try to minimize isolates of Campylobacter; the time of approval of the the occurrence of resistant foodborne fluoroquinolone resistance had risen to fluoroquinolones to help ensure that pathogens that may be transferred to 17.6 percent among C. jejuni and 30 resistance to fluoroquinolones did not humans through food. CVM is percent among C. coli, a statistically develop in bacteria that are transferred supporting the development of printed significant increase (Ref. 49). from poultry to humans, and to detect material and videotapes based on the 3. Poultry Isolate Data From NARMS any trend towards the development of prudent use guidelines developed by and Other Sources resistance at an early stage. First, CVM the AVMA to educate producers and Approximately 9.4 percent of the C. imposed two restrictions on the use of veterinarians about food-producing the fluoroquinolones. CVM limited the jejuni isolated from chicken carcasses at animal drug use. CVM is also committed federally inspected slaughter plants in drugs to use by or on the order of a to help develop other educational licensed veterinarian. Also, FDA issued 1998 were fluoroquinolone resistant strategies to be disseminated to (Ref. 50). The Campylobacter isolates an order to prohibit all extra-label uses veterinarians and food-producing of fluoroquinolones in animals, which were collected in a pilot study during animal producers via symposia and the latter 3 months of the year. The 1999 became effective in August 1997 (21 exhibits at scientific meetings. CFR 530.41). data set, collected for the entire year, Veterinary medical schools may also use Second, the agency took steps to shows that approximately 9.3 percent of these educational materials as part of a gather surveillance data on the the C. jejuni were resistant to development of antimicrobial resistance food safety curriculum. fluoroquinolones (Ref. 51). However, the among foodborne pathogens, including B. Development of Resistance After FDA 1999 data when segregated by State resistance to fluoroquinolones. In 1996, Approvals of Fluoroquinolones for Use show that several areas of the country FDA, CDC, and the U.S. Department of in Poultry had significantly higher than the 9.3 Agriculture (USDA) established the percent average level (Ref. 2). When the National Antimicrobial Resistance 1. Overview isolate test results are weighted by the Monitoring System: Enteric Bacteria Despite the previously described level of chicken production in each (NARMS) to prospectively monitor restrictions placed by FDA on the use of State, the level of resistance among C. changes in antimicrobial susceptibilities the approved poultry fluoroquinolone jejuni is approximately 12 percent for of selected zoonotic enteric pathogens products, fluoroquinolone resistance 1999 (Ref. 2). from human and animal clinical among Campylobacter developed and Campylobacter isolates from retail specimens, from healthy farm animals, increased after the 1996 approvals. CVM chicken products show even higher and from carcasses of food-producing believes, based on research, that prior to levels of fluoroquinolone resistance. In animals at slaughter (Ref. 47). 1995, there was very little, if any, January-June 1999, public health Nontyphoid Salmonella was initially fluoroquinolone-resistant laboratories in Georgia, Maryland, and selected as the sentinel organism and Campylobacter in the United States Minnesota, under the direction of the the program has been expanded each among domestically acquired foodborne CDC, tested 180 chickens with 23 year since its inception. NARMS is disease (see section V.B.5 of this distinct brand names that were currently monitoring susceptibilities of document). After the approval, however, purchased from 25 grocery stores (Ref. human and animal isolates of fluoroquinolone resistance was 52). Campylobacter were isolated from Salmonella, E. coli, Campylobacter, and observed in Campylobacter from human 80 (44 percent) of the chickens. Enterococcus. NARMS is set up as two clinical cases, and in poultry isolates Nineteen (24 percent) of the samples equal parts, human and animal, that use taken from slaughter plants and retail had Campylobacter isolates resistant to
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These Campylobacter isolates (1999) show Fluoroquinolones have been available retail chicken findings are consistent 17.6 percent resistance among C. jejuni for human use since 1986 when with those from an earlier, independent in humans, and 9.3 percent resistance ciprofloxacin was approved in the study by the Minnesota Department of among C. jejuni on chickens sampled at United States (Refs. 1 and 54). Health, described in the next slaughter plants. Retail samples taken in Ciprofloxacin soon was one of the most subsection. 1999 indicate even higher levels of commonly used antimicrobials to treat fluoroquinolone-resistant infections caused by a variety of 4. Human and Poultry Isolate Data From bacterial infections in humans, the Minnesota Study Campylobacter on chickens (Ref. 52). After thoroughly analyzing all the including Campylobacter infections. Researchers at the Minnesota data and evidence, CVM has determined However, emergence of domestically Department of Health studied quinolone that a significant cause of the emergence acquired fluoroquinolone-resistant and fluoroquinolone resistance among of domestically-acquired human foodborne infections in numbers Minnesota residents, and evaluated fluoroquinolone-resistant large enough to be detected by national chicken as the source of the resistance. Campylobacter infections in humans is surveillance systems did not occur until They found that the proportion of the consumption of, or contact with, sometime between 1996 and 1998 Ref. 1). fluoroquinolone-resistant C. jejuni contaminated food (see section IV.B of isolates from humans increased from 1.3 Only rare, sporadic, and isolated this document), that poultry is the most incidents of fluoroquinolone-resistant percent in 1992 to 10.2 percent in 1998 likely source of campylobacteriosis in (Ref. 1). Campylobacter infections were reported humans (see section V.C.2 of this 1 The proportion of resistant C. jejuni in humans prior to 1995. (NARMS was document), and that poultry is also a not initiated until January 1996 and collected from all reported cases of source of resistant Campylobacter (see illness increased only slightly from 1992 Campylobacter were not tested until section V.B.3 and V.B.4 of this 1998.) In addition, as shown in section to 1994. Although researchers found document). CVM has also concluded V.B.4 of this document, only very low that increases between 1996 and 1998 that the administration of levels of resistance were detected among were predominantly associated with fluoroquinolones to chickens leads to isolates from human Campylobacter foreign travel, the percentage of resistant development of fluoroquinolone- cases collected by the Minnesota infections that were acquired resistant Campylobacter in the chickens Department of Health from 1992 to 1994 domestically also increased from 0.3 (see section IV.C of this document). (Ref. 1). Additional data from Minnesota percent to 3 percent between 1996 and Fluoroquinolone-resistant demonstrated an increase in 1998 (Ref. 1). Campylobacter have been found in fluoroquinolone resistance among As part of the study, the Minnesota broiler chicks that had been Campylobacter collected from Department of Health in cooperation administered fluoroquinolone drugs domestically-acquired cases of human with the Minnesota Department of (Ref. 35). Further, resistant illness after the approval of the poultry Agriculture collected 20 different Campylobacter found on chicken fluoroquinolones (Refs. 1 and 54). The brands of retail chicken products from carcasses would not have resulted from researchers were able to conclude that 18 markets in the Twin Cities metro area use of a nonfluoroquinolone drug the 1996 to 1998 increases in domestic in 1997. Campylobacter were isolated because fluoroquinolone resistance in cases were due to the use of from 88 percent (80/91) of the samples; Campylobacter arises exclusively from fluoroquinolones in poultry. That 20 percent of these were Campylobacter clonal expansion, rather than by the conclusion is supported by the resistant to fluoroquinolones. The transfer of plasmids or resistance association found between molecular products with resistant strains had been determinants (Ref. 53). Also, the subtypes of resistant C. jejuni strains processed in five States (Ref. 1). fluoroquinolone resistance results only that were acquired domestically in Molecular subtyping revealed a strong from drug use; that is, the resistance humans and those found in chicken association between resistant C. jejuni could not have developed naturally products (Ref. 1). (See section V.B.4 of strains from the retail chicken products since fluoroquinolones are totally this document.) and C. jejuni strains from the synthetic antimicrobials with no known Because there was no food-producing domestically acquired human cases of natural analogues. (See also discussion animal fluoroquinolone use other than campylobacteriosis. The study used in section IV.A of this document.) use in poultry until late 1998 (when polymerase chain reaction with Consequently, CVM has concluded, CVM approved fluoroquinolones for use restriction length polymorphism based on a careful study of all relevant in cattle), CVM believes that the data flagellin gene typing to identify strains data and information, that use of presented in this section V.B of the of fluoroquinolone-resistant C. jejuni fluoroquinolones in poultry is a document) provide strong evidence that among isolates from the domestically significant cause of domestically the increase in domestically acquired acquired human cases and locally acquired resistant Campylobacter fluoroquinolone resistance observed in available retail chicken products. The infections in humans. people since 1996 (Ref. 1) is largely investigators attributed the 1996 to 1998 CVM’s conclusion is supported by the associated with the use of increase in resistant domestic cases establishment of a temporal association fluoroquinolones in poultry. Data from among humans to poultry treated with between the approval of the other countries, which showed fluoroquinolones (Ref. 1). The fluoroquinolones for poultry and the investigators concluded that ‘‘the use of emergence of fluoroquinolone-resistant 1 In two surveys encompassing 474 human fluoroquinolones in poultry, which Campylobacter in humans. Although isolates from 1982 to 1992 in the United States, only a single ciprofloxacin resistant isolate was began in the United States in 1995, has most of the data cited above were identified. This isolate was subsequently speciated created a reservoir of resistant C. jejuni’’ collected after the approval, CVM as C. lari, which is intrinsically resistant to (Ref. 1). believes that there was very little, if any, fluoroquinolones (Ref. 54).
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Culture and of this document.) one of the most valuable antimicrobial sensitivity testing of Campylobacter can drug classes available to treat human take 48 to 96 hours before results are CVM’s conclusion is also supported infections because of their broad available to provide guidance to the by an examination of the two most spectrum of activity, pharmacokinetics, physician in selection of a treatment likely other possible causes of safety, and ease of administration (Ref. regimen. Thus, the physician needs to fluoroquinolone-resistant 56). This class of drugs is effective be able to confidently prescribe an agent Campylobacter in humans. One possible against a wide range of human diseases likely to be immediately effective cause is the direct use of and is widely used both in treatment against the array of organisms most fluoroquinolones in humans. Although and prophylaxis of bacterial infections likely to be causing the patient’s severe fluoroquinolone-resistant in the community and in hospitals (Ref. symptoms. Campylobacter may develop in the 56). Fluoroquinolones are important Treatment of serious susceptible intestinal tract of persons with these because they are active against a variety enteric infections with an effective infections who are treated with of organisms resistant to most other fluoroquinolone (e.g., ciprofloxacin) can fluoroquinolones, spread of the classes of antibiotics or for which reduce the duration of illness and most organisms to other persons is alternative agents are more toxic and/or likely prevent complications and uncommon because person-to-person not available for oral administration. adverse outcomes, including They have been very effective in treating transmission of these organisms is rare hospitalization (Refs. 19 and 58). The or preventing serious, often life- in developed countries (Ref. 3). As a magnitude of the benefit of antibiotic threatening, infections in a number of treatment is directly related to the early result, the resistance due to direct major areas of human medicine, both in initiation of therapy (Refs. 19 and 58). human use is likely to be limited (Refs. the hospital and in the community. In For example, effective treatment of 12 and 19). (See section IV.B of this the hospital setting, the campylobacteriosis with document.) The lack of an increase in fluoroquinolones are very often life- fluoroquinolones has been shown to fluoroquinolone-resistant human cases saving drugs of choice for a wide variety decrease the duration of illness from 10 from the time when fluoroquinolones of common resistant and serious days to 5 days and the mean duration were first used in human medicine, the infections because of both their activity of diarrhea from 5 to 1.3 days (Refs. 7, high level of human use since their and their favorable safety profiles. 19, and 58). approval, and the emergence of Fluoroquinolones are particularly fluoroquinolone resistance in human important in the treatment of gram 2. Foodborne Diseases cases of Campylobacter infections soon negative infections, including those a. Introduction. Foodborne diseases after the approval of fluoroquinolones caused by Campylobacter, but also have a major public health impact in the for poultry, all support the conclusion including Shigella, Salmonella, E. coli, United States. Recent estimates describe that the resistance observed in humans Klebsiella and other Enterobactericiae. 5,000 deaths and 76 million foodborne is due to the use of fluoroquinolones in These type of enteric bacteria cause a illnesses annually (Ref. 59). The causes poultry. wide variety of infections and are of foodborne illness are varied and frequently resistant to agents such as include bacteria, parasites, viruses, Exposure to Campylobacter- ampicillin, tetracycline, trimethoprim- toxins and novel agents. Clinical contaminated food can occur during sulfa and many cephalosporins (Ref. severity of foodborne disease also varies foreign travel and, indeed, some of the 56). In addition, the fluoroquinolones and ranges from mild gastroenteritis to fluoroquinolone resistance identified are often less toxic and more convenient life-threatening neurologic, hepatic, and among humans is due to acquiring an to administer than alternative renal syndromes as well as septicemia illness while traveling outside the treatments that may be available for (Ref. 59). Development of resistance in United States. However, a risk resistant organisms. foodborne bacterial pathogens to safe assessment conducted by CVM Fluoroquinolones are the agents most and effective antimicrobials complicates demonstrates a significant human health frequently used as the drugs of choice the medical and public health concern impact from domestically acquired in the empiric treatment of patients as important treatment options are fluoroquinolone-resistant presenting to a physician with serious compromised or lost (Refs. 7, 19, 61, Campylobacter infections due to the use gastrointestinal symptoms such as acute and 62). of fluoroquinolones in chickens (Ref. 2). diarrhea or possible enteric fever (e.g., b. Campylobacteriosis. The three (See section V.C.3 of this document.) typhoid fever) because they traditionally primary causes of bacterial foodborne have exhibited a very high level of disease in the United States are CVM therefore believes that a clinical effectiveness against most Campylobacter, Salmonella, and some significant cause of the emergence of enteric pathogens (Refs. 4 and 57). pathogenic strains of E. coli. fluoroquinolone-resistant Severity of illness is one of the most Campylobacter infections are Campylobacter infections in humans is important criteria physicians use in predominantly foodborne infections the consumption of, or contact with, determining which patients require associated with animal-derived food contaminated poultry that had been immediate treatment for a presumed products (Refs. 59, 63, and 64). administered fluoroquinolones, had infectious enteric illness. Other criteria Campylobacter is the most common contact with other poultry treated with include having a complicating medical known cause of foodborne illness in the this drug, or had contact with the condition and belonging to a high-risk United States (Ref. 3), causing an environment contaminated directly or group such as persons who are estimated 2 million cases every year indirectly with this drug. immunocompromised. Upon (Ref. 60). Compared to patients with presentation to the physician, the typical noninvasive salmonellosis, patient is examined and if treatment is patients with C. jejuni or Campylobacter
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While etiologic agent is confirmed by a resistance levels, and the evidence these symptoms usually improve within medical laboratory), the therapy may be leading to the conclusion that the use of several days, they persist or recur in 15 ineffective or less effective, and the fluoroquinolones in chickens is a to 25 percent of patients and can be illness is more likely to be prolonged or significant cause of fluoroquinolone confused with chronic bowel diseases result in complications (Ref. 4). Also, resistance in humans, establish an (Ref. 65). For example, among 460 the clinical signs of patients with adverse effect on human health by sporadic (not associated with an campylobacteriosis are fluoroquinolones. To assist in epidemic) cases of campylobacteriosis indistinguishable from enteric disease establishing the extent of the adverse recently reported in 19 representative caused by Salmonella, which also is human health impact of U.S. counties, the mean duration of treated with fluoroquinolones. Relapses fluoroquinolone use in poultry, CVM illness was 10 days, with 7 lost occur in approximately 5 to 10 percent developed a risk assessment model. The workdays, and one-half hospitalization of untreated patients with risk assessment estimates the extent of day. Five patients (1 percent) died (Ref. campylobacteriosis (Ref. 4) and have the risk to human health from resistant 66). Effective treatment of been associated with fluoroquinolone Campylobacter pathogens attributed to campylobacteriosis with resistance (Ref. 74). the use of fluoroquinolones in chickens fluoroquinolones within the first 2 days Antibiotic therapy is always indicated in the United States. Specifically, the of illness decreased the duration of for patients who demonstrate symptoms risk assessment model relates the illness from 10 days to 5 days (Refs. 7, of high fever, bloody diarrhea, or more prevalence of fluoroquinolone-resistant 19, and 58). than eight stools in 24 hours; who are Campylobacter infections in humans Campylobacter species are often immunosuppressed; who have associated with the consumption of found as commensal bacteria, which are bloodstream infections; or whose chicken to the prevalence of bacteria that exist in an animal without symptoms worsen or persist for more fluoroquinolone-resistant causing harm to that animal. These than 1 week (Ref. 4). More invasive Campylobacter in chickens (Ref. 2). The bacteria are carried in the intestinal tract disease such as blood-borne infections risk assessment addressed that portion of food-producing animals and can occur in less than 1 percent of patients of the risk that was quantifiable, which contaminate food during slaughter and with C. jejuni infections and are more is the risk related to consumption of processing (Ref. 67). The USDA Food common in the elderly or very young chicken. The unquantifiable portion, Safety Inspection Service has recently individuals as well as those with that portion due to spread of the conducted surveys of recovery rates and impaired immune systems (Ref. 65). pathogen from chicken to other foods estimated the mean number per unit Rare manifestations of through contamination during food (gram, cm3) of product for some of the campylobacteriosis can include preparation or from secondary spread to major foodborne pathogens found on meningitis, endocarditis, and septic other animals, was not considered in the raw animal products at slaughter and abortion (Ref. 4). risk assessment. processing. Raw product isolation rates Campylobacteriosis also carries the As explained in section V.B.5 of this vary by species, with turkeys and potential for serious sequelae as a result document, the presence of chickens appearing to have the highest of immunologic reactions to the fluoroquinolone-resistant rates of Campylobacter recovery (Refs. infection. The disease has been linked Campylobacter on chicken carcasses 68, 69, 70, and 71). to reactive arthritis and Reiter’s results from the use of fluoroquinolones Broiler chickens carry the highest Syndrome as well as Guillain-Barre in chickens. This conclusion was used carcass and ground product load of Syndrome (Ref. 65). Guillain-Barre as a parameter in the risk assessment. Campylobacter when compared to other Syndrome is an autoimmune-mediated This does not mean, for purposes of the food-producing animals at slaughter disorder of the peripheral nervous risk assessment, that every chicken (Refs. 70 and 71). These data are system. Since the elimination of polio, carrying resistant Campylobacter had to consistent with the repeated this syndrome is now the most common have been treated with a observations in epidemiological studies cause of acute flaccid paralysis (Ref. 73). fluoroquinolone. Resistant organisms of the increased risk of Many studies have shown a link could have been acquired from a campylobacteriosis associated with between campylobacteriosis and contaminated environment due to exposure to poultry. In surveys of retail Guillain-Barre Syndrome. Culture and fluoroquinolone drug use in a previous food products conducted by other serologic data indicate that 30 to 40 flock, through contact with other organizations, Campylobacter was percent of patients with the syndrome chickens during transportation to the isolated from: 2 to 20 percent of raw have evidence of a preceding slaughter plant and antemortem beef, 40 percent of veal; up to 98 percent Campylobacter infection, but this may processing, or through contamination in of chicken meat; low proportions of be an underestimate (Ref. 73). C. jejuni the slaughter plant by other infected pork, mutton, and shellfish; 2 percent of is the most common species identified chicken carcasses. fresh produce from outdoor markets and from patients with Guillain-Barre The number of Campylobacter culture 1.5 percent of mushrooms (Refs. 15 and Syndrome, but other species of confirmed human cases in the U.S. 72). Campylobacter may be involved (Ref. population was used to estimate the The symptoms exhibited by persons 73). It is not known whether resistant total burden of campylobacteriosis. with an enteric foodborne illness Campylobacter infections are more These data are collected from State include vomiting, diarrhea, abdominal susceptible to developing sequelae such public health laboratories that pain, cramping, and fever. The causal as Guillain-Barre Syndrome. There is participate in FoodNet, the CDC’s agent of an enteric illness is not easily also evidence suggesting that Guillain- Foodborne Disease Active Surveillance
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Network. FoodNet monitors the illness may be extended or therapy may extensive treatment records. Even if incidence of foodborne disease in be ineffective. Moreover, feasible, due to poultry production and humans and conducts studies to fluoroquinolone resistance in processing practices, this approach identify the sources and consequences Campylobacter infections has been would not prevent untreated poultry of infection. Using the data on human associated with relapses (Ref. 74). from picking up the resistant organism Campylobacter cases reported in Campylobacter resistance therefore from treated poultry or from the FoodNet, the risk assessment calculated presents a dilemma for the physician. If environment, exposures that may be a mean estimate of 1.7 million cases of fluoroquinolone treatment is given substantial during transportation to campylobacteriosis (5th and 95th based on symptoms, there is a risk that slaughter and antemortem containment. percentiles: 1.1 million and 2.7 million) the treatment will not be effective or CVM also considered establishing a for 1999 (Ref. 2). will be less effective and valuable time drug registry requiring that veterinarians The model also estimates the number will be lost. If the physician waits for a demonstrate the need for a of fluoroquinolone-resistant culture to determine the organism and fluoroquinolone through culture and Campylobacter cases in humans its susceptibility to antimicrobials, again antimicrobial susceptibility testing and attributable to chickens. This estimate valuable time will be lost. In either case, request permission to use the drug in excludes travelers to countries outside the illness may be prolonged and result chickens or turkeys from CVM before the United States, those patients who in complications, including doing so. This approach would greatly were prescribed a fluoroquinolone prior hospitalization and deaths. The diminish the exposure of poultry to to stool culture, and those patients who physician could turn to another drug for fluoroquinolones and could also be used were unsure of the timing of their empiric treatment, but alternatives with to enforce a ‘‘single use’’ labeling treatment in relation to stool culture. the spectrum of activity shown by the provision. The treated animals could be For 1999, the mean estimate of the fluoroquinolones are not available or tagged for followup testing at the domestically-acquired fluoroquinolone- may be less desirable than the slaughter plant and if resistant resistant Campylobacter cases in fluoroquinolone due to greater side organisms were identified, the humans attributable to chickens is effects associated with therapy or contaminated carcasses could be 190,421 (5th and 95th percentiles: increased cost of treatment. Even if an diverted to nonfood uses. CVM also 103,471 and 318,321) (Ref. 2). The acceptable alternative is available at the determined that this alternative was model also estimated the number of time, the public health is diminished by impractical due to the cost of sampling, humans with fluoroquinolone-resistant the loss of an effective drug from the process control problems with campylobacteriosis due to chickens who physician’s armamentarium. The accumulation of carcasses due to the actually received a fluoroquinolone Campylobacter risk assessment provides prohibitive amount of time required for drug for therapy. evidence of the extent of the adverse current resistance testing techniques, For 1999, the estimated mean number impact of fluoroquinolone use in and the public health risk associated of people infected with poultry on human health. The risk with the handling of contaminated fluoroquinolone-resistant assessment determined in 1999 a mean carcasses. Campylobacter from consuming or estimate of 11,477 people (5th and 95th VII. Notice of Opportunity for a handling chicken and who subsequently percentiles: 6,412 and 18,978) infected Hearing received a fluoroquinolone as therapy is with fluoroquinolone-resistant 11,477 (5th and 95th percentiles: 6,412 Campylobacter from consuming or Therefore, notice is given to Bayer and 18,978) (Ref. 2). These people handling chicken and who subsequently Corp., Agriculture Division, Animal received less effective or ineffective received a fluoroquinolone as therapy. Health, that CVM proposes to withdraw therapy for their infections. Because The fact that fluoroquinolone use in the approval of the fluoroquinolone their therapy was less effective or poultry has resulted in increased enrofloxacin for use in poultry. This ineffective, these people would have resistance of Campylobacter infecting action is based on section 512(e)(1)(B) of had adverse health effects. Since the humans is clear, as is the risk to human the act in that new evidence not risk assessment was limited to health. Continued use will likely lead to contained in the NADA or not available resistance development due to use of even higher levels of resistance and until after the application was fluoroquinolones in chickens only and additional adverse health effects. approved, evaluated together with the the impact is a mean estimate, the actual evidence available when the application VI. Other Considerations risk to humans from fluoroquinolone- was approved, shows that enrofloxacin resistant Campylobacter infections from Before issuing this notice of is not shown to be safe under the all foodborne sources is likely to be opportunity for a hearing on the conditions of use upon the basis of higher. withdrawal of the approval for use of which the application was approved. fluoroquinolones in poultry, CVM In accordance with section 512 of the 4. Summary of Human Health Impact considered requiring revisions to the act and part 514 (21 CFR part 514) and Foodborne diseases have a major labeling of the fluoroquinolones to exert under the authority delegated to the public health impact in the United more control over their use. Limiting Director of the Center for Veterinary States, and Campylobacter is the most use to individual bird treatment and Medicine (21 CFR 5.84), CVM hereby common known cause of foodborne requiring that the drugs not be used provides an opportunity for a hearing to illness. Fluoroquinolones are especially more than once in any individual show why approval of the new animal important in the treatment of foodborne animal in order to minimize the initial drug application for enrofloxacin for use diseases. Selection of Campylobacter development of resistant enteric in poultry, NADA 141–828, should not resistance to fluoroquinolones is organisms were options considered. be withdrawn. Any hearing would be therefore a particular human health CVM determined, however, that these subject to part 12 (21 CFR part 12). concern. Fluoroquinolones used in use limitations would be impractical for If a sponsor decides to seek a hearing, treating patients with enteritis are both the veterinary practitioners and the sponsor must file: (1) On or before typically prescribed empirically because poultry producers. The limitations November 30, 2000, a written notice of when treatment is delayed pending the would necessitate mandatory animal appearance and request for a hearing, results of culture and sensitivity, the identification and maintenance of and (2) on or before January 2, 2001, the
VerDate 112000 19:49 Oct 30, 2000 Jkt 194001 PO 00000 Frm 00037 Fmt 4703 Sfmt 4703 E:\FR\FM\31OCN1.SGM pfrm02 PsN: 31OCN1 Federal Register / Vol. 65, No. 211 / Tuesday, October 31, 2000 / Notices 64963 data, information, and analyses relied that does not individually or 12. Angulo, F. J., R. V. Tauxe, and M. L. on to demonstrate that there is a cumulatively have a significant effect on Cohen, ‘‘The Origins and Consequences of genuine and substantial issue of fact to the human environment. Therefore, Antimicrobial-resistant Nontyphoidal justify a hearing as specified in neither an environmental assessment Salmonella: Implications for Use of Fluoroquinolones in Food Animals,’’ In: Use § 514.200. nor an environmental impact statement of quinolones in food animals and potential Any other person may also submit is required. impact on human health, WHO/EMC/ZDI/ comment on this notice. Procedures and IX. References 98.12, Geneva, Switzerland, pp. 205-219. requirements governing this notice of 13. Harris, N., N. Weiss, and C. Nolan, opportunity for a hearing, a notice of The following references have been ‘‘The Role of Poultry and Meats in The appearance and request for a hearing, placed on display in the Dockets Etiology of Campylobacter jejuni/coli submission of data, information, and Management Branch (address above) Enteritis,’’ American Journal of Public analyses to justify a hearing, other and may be seen by interested persons Health, 76(4), pp. 407–411, April 1986. comments, and a grant or denial of a between 9 a.m. and 4 p.m., Monday 14. Threlfall, E., J. Frost, L. Ward, and B. hearing, are contained in § 514.200 and through Friday. Rowe, ‘‘Increasing Spectrum of Resistance in Multiresistant Salmonella typhimurium,’’ part 12. 1. Smith, K., J. Besser, C. Hedberg, F. T. Lancet, vol. 347, pp. 1053–1054, 1996. The failure of a holder of an approval Leano, J. B. Bender, J. H. Wicklund, B. P. 15. Communicable Disease Control to file timely a written appearance and Johnson, K. A. Moore, and M. Osterholm, Section, Seattle-King County Department of request for hearing as required by ‘‘Quinolone-resistant Campylobacter Jejuni Public Health, ‘‘Surveillance of the Flow of § 514.200 constitutes an election not to Infections in Minnesota, 1992–1998,’’ New Salmonella and Campylobacter in a avail himself or herself of the England Journal of Medicine, 340(20), pp. Community,’’ August 1984. opportunity for a hearing, and the 1525–1532, 1999. 16. Holmberg, S. D., M. T. Osterholm, K. 2. FDA, ‘‘Human Health Impact of A. Senger, and M. L. Cohen, ‘‘Drug-resistant Director of the Center for Veterinary Fluoroquinolone Resistant Campylobacter Medicine will summarily enter a final Salmonella From Animals Fed Attributed to the Consumption of Chicken,’’ Antimicrobials,’’ New England Journal of order withdrawing the approvals. October 18, 2000. Medicine, 311(10), pp. 617–622, 1984. A request for a hearing may not rest 3. Tauxe, R. V., ‘‘Epidemiology of 17. Spika, J. S., S. H. Waterman, G. W. Soo upon mere allegations of denials, but Campylobacter Jejuni Infections in the Hoo, M. E. St. Louis, R. E. Pacer, S. M. James, must set forth specific facts showing United States and Other Industrial Nations,’’ M. L. Bissett, L. W. Mayer, J. Y. Chiu, B. Hall, that there is a genuine and substantial In: Campylobacter, edited by I. Nachamkin, K. Greene, M. E. Potter, M. L. Cohen, and P. issue of fact that requires a hearing. If M. J. Blaser, 2d Ed., American Society for A. Blake, ‘‘Chloramphenicol-Resistant Microbiology, Washington, DC, pp. 9–12, it conclusively appears from the face of Salmonella Newport Traced Through 2000. Hamburger to Dairy Farms,’’ New England the data, information, and factual 4. Blaser, M., ‘‘Campylobacter and Related analyses in the request for hearing that Journal of Medicine, 316(10), pp. 565–570, Species,’’ In: Mandell, Douglas and Bennett’s 1987. there is no genuine and substantial issue Principles and Practice of Infectious Disease, 18. Tacket, C. O., L. B. Dominguez, H. J. edited by G. Mandell, J. Bennett, and R. of fact that precludes the withdrawal of Fisher, and M. L. Cohen, ‘‘An Outbreak of Dolin, 4th ed., Churchill Livingston, New approval of the applications, or when a Multiple-drug-resistant Salmonella enteritis York, pp. 1948–1956, 1995. request for hearing is not made in the From Raw Milk,’’ Journal of the American required format or with the required 5. Jacobs-Reitsma, W., ‘‘Aspects of Epidemiology of Campylobacter in Poultry,’’ Medical Association, 253(14), pp. 2058–2060, analyses, the Commissioner of Food and Veterinarian Quarterly, 19(3), pp. 113–117, 1985. Drugs will enter summary judgment 1997. 19. Cohen, M. L. and R. V. Tauxe, ‘‘Drug- against the person who requests a 6. O’Brien, T. F., ‘‘The Global Epidemic resistant Salmonella in the United States: An hearing, making findings and Nature of Antimicrobial Resistance and the Epidemiologic Perspective,’’ Science, vol. conclusions, and denying a hearing. Need to Monitor and Manage it Locally,’’ 234, pp. 964–969, 1986. If a hearing is requested and is Clinical Infectious Diseases, vol. 24 (Suppl. 20. Carattoli, A., F. Tosini, and P. Visca, 1), pp. 2–8, 1997. ‘‘Multidrug-resistant Salmonella enterica justified by the sponsor’s response to serotype Typhimurium Infections,’’ letter to this notice of opportunity for a hearing, 7. Anonymous; Report of the American Society for Microbiology Task Force on the Editor, New England Journal of Medicine, the issues will be defined, an Antibiotic Resistance; The American Society 339(13), pp. 921–922, 1998. administrative law judge will be for Microbiology, Public and Scientific 21. Evans, S. and R. Davies, ‘‘Case Control assigned, and a written notice of the Affairs Board; Washington, DC, March 16, Study of Multiple-resistant Salmonella time and place at which the hearing will 1995. typhimurium DT104 Infection of Cattle in commence will be issued as soon as 8. Institute of Medicine, Committee on Great Britain,’’ Veterinary Record, 139(23), practicable. Emerging Microbial Threats to Health, edited pp. 557–558, Dec. 7, 1996. All submissions under this notice by J. Lederberg, R. E. Shope, and S. C. Oaks, 22. Threlfall, E. J., J. A. Frost, L. R. Ward, Emerging Infections: Microbial Threats to and B. Rowe, ‘‘Epidemic in Cattle and must be filed in four copies. Except for Humans of Salmonella typhimurium DT104 data and information prohibited from Health in the United States, Washington, DC, National Academy Press, 1992. with Chromosomally Integrated Multiple public disclosure under 21 U.S.C. 331(j) 9. National Research Council, ‘‘The Use of Drug Resistance,’’ Veterinary Record, vol. or 18 U.S.C. 1905, the submissions may Drugs in Food Animals: Benefits and Risks,’’ 143, p. 577, 1994. be seen in the Dockets Management Food and Nutrition Board, Institute of 23. Benson, C. E., D. S. Munro, and S. Branch (address above) between 9 a.m. Medicine, National Academy Press, Rankin, ‘‘Salmonella typhimurium DT104 in and 4 p.m. Monday through Friday. Washington, DC, 1999. the northeast USA,’’ Veterinary Record, vol. This notice is issued under the 10. McGowan, Jr. J. E., ‘‘Antimicrobial 140, pp. 503–504, Nov. 8, 1997. Federal Food, Drug, and Cosmetic Act Resistance in Hospital Organisms and its 24. Besser, T. E., C. C. Gay, J. M. Gay, D. (section 512 (21 U.S.C. 360b)) and under Relation to Antibiotic Use,’’ Reviews of D. Hancock, D. Rice, L. C. Pritchett, and E. D. Erickson, ‘‘Salmonellosis Associated with the authority delegated to the Director of Infectious Diseases, 5(6), pp. 1033–1048 Nov–Dec, 1983. S. Typhimurium DT104 in the USA,’’ the Center for Veterinary Medicine (21 11. Baquero, F., J. Martinez-Beltran, and E. Veterinary Record, vol. 140, p.75, 1997. CFR 5.84). Loza, ‘‘A Review of Antibiotic Resistance 25. Glynn, M. K., C. Bopp, W. Dewitt, P. VIII. Environmental Impact Patterns of Streptococcus pneumoniae in Dabney, M. Mokhtar, and F. J. Angulo, Europe,’’ Journal of Antimicrobial ‘‘Emergence of Multidrug-resistant The agency has determined under 21 Chemotherapy, vol. 28 (Suppl. C), pp. 31–38, Salmonella enterica Serotype Typhimurium CFR 25.33(g) that this action is of a type 1991. DT104 Infections in the United States,’’ New
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England Journal of Medicine, 338(19), pp. Growth Promoter is Associated With the Antimicrobial Resistance Monitoring System: 1333–1338, 1998. Occurrence of Vancomycin-resistant Enteric Bacteria—Animal Campylobacter 26. Wall, P.G., D. Morgan, K. Lamden, M. Enterococcus faecium on Danish Poultry and Isolate Report, Athens, GA, Personal Ryan, M. Griffin, E. J. Threlfall, L. R. Ward, Pig Farms,’’ Preventive Veterinary Medicine, communication Dr. P. Fedorka Cray. and B. Rowe, a case control study of infection vol. 31, pp. 95–112, 1997. 52. Rossiter, S., K. Joyce, M. Ray, J. Benson, with an epidemic strain of multiresistant 39. Kruse, H., B. K. Johansen, L. M. Rorvik, C. Mackinson, C. Gregg, M. Sullivan, K. Salmonella typhimurium DT104 in England and G. Schaller, ‘‘The Use of Avoparcin as a Vought, F. Leano, J. Besser, N. Marano, F. and Wales, Communicable Disease Report, Growth Promoter and the Occurrence of Angulo, ‘‘High Prevalence of Antimicrobial- Vol. 4:R130-R135, Review No. 11, October Vancomycin Resistant Enterococcus species resistant, Including Fluoroquinolone- 14, 1994. in Norwegian Poultry and Swine resistant, Campylobacter on Chicken in U.S. 27. Carratala, J., A. Fernandez-Sevilla, F. Production,’’ Microbial Drug Resistance, 5(2), Grocery Stores,’’ Meeting of the American Tubau, M. A. Dominguez, and F. Gudiol, pp. 135–139, 1999. Society for Microbiology, poster C296, Los ‘‘Emergence of Fluoroquinolone-resistant 40. Levy, S. B., The Antibiotic Paradox: Angeles, May 24, 2000. Escherichia coli in Fecal Flora of Cancer How Miracle Drugs are Destroying the 53. Hooper, D. C., ‘‘New Uses for New and Patients Receiving Norfloxacin Prophylaxis,’’ Miracle, Plenum Press, New York, pp. 130– Old Quinolones and the Challenge of Antimicrobial Agents and Chemotherapy, 136, 1992. Resistance,’’ Clinical Infectious Diseases, 30, 40(2), pp. 503–505, 1996. 41. Moellering Jr., R. C., ‘‘Quinolone pp. 243–254, 2000. 28. Pena, C., J. M. Albareda, R. Pallares, M. Antimicrobial Agents: Overview and 54. Smith, K., J. Bender, M. Osterholm, Pujol, F. Tubau, and J. Ariza, ‘‘Relationship Conclusions,’’ In: Quinolone Antimicrobial ‘‘Antimicrobial Resistance in Animals and Between Quinolone Use and Emergence of Agents, 2d ed., edited by D. C. Hooper and Relevance to Human Infections,’’ In: Ciprofloxacin-resistant Escherichia coli in J. S. Wolfson, American Society for Campylobacter, edited by I. Nachamkin and Bloodstream Infections,’’ Antimicrobial Microbiology, Washington, DC, pp. 527–535, M. Blaser, 2d ed., American Society for Agents and Chemotherapy, 39(2), pp. 520– 1993. Microbiology, Washington, DC, pp. 483–495, 524, 1995. 42. Piddock, L. J. V., ‘‘Quinolone 2000. 29. Bates, J., J. Jordens, and D. Griffiths, Resistance and Campylobacter spp,’’ Journal 55. Threlfall, E. J., J. A. Frost, and B. Rowe, ‘‘Farm Animals as a Putative Reservoir for of Antimicrobial Chemotherapy, vol. 36, pp. ‘‘Fluoroquinolone Resistance in Salmonellas Vancomycin-resistant Enterococcal Infection 891–898, 1995. and Campylobacte’s From Humans,’’ British in Man,’’ Journal of Antimicrobial 43. Perez-Tallero, E., F. Otero, C. Lopez- Medical Journal, vol. 318, pp. 943–944, 1999. Chemotherapy, vol. 34, pp. 507–516, 1994. Lopategui, et al., ‘‘High prevalence of 56. Peterson, L., ‘‘Quinolone Resistance in 30. Piddock, L. J. V., ‘‘Does the Use of ciprofloxacin resistant Campylobacter jejuni/ Clinical Practice: Occurrence and Antimicrobial Agents in Veterinary Medicine coli in Spain,’’ Abstract C–21, p. 49. In: Importance,’’ In: Quinolone Antimicrobial and Animal Husbandry Select for Antibiotic Program and Abstracts of the 37th Agents, edited by D. C. Hooper and J. S. Resistant Bacteria That Infect Man and Interscience Conference on Antimicrobial Wolfson, 2d ed., American Society Compromise Antimicrobial Chemotherapy?,’’ Agents and Chemotherapy, American Society Microbiology, Washington, DC, pp. 119–137, Journal of Antimicrobial Chemotherapy, vol. of Microbiology, Washington, DC, 1997. 1993. 38, pp. 1–93, 1996. 44. Velazquez, J. B., A. Jimenez, B. 57. Sande, M., J. H. Chambers, 31. World Health Organization (WHO), The Medical Impact of the Use of Antimicrobials Chomon, and T. G. Villa, ‘‘Incidence and ‘‘Antimicrobial Agents, General in Food Animals, Report of a WHO meeting, Transmission of Antibiotic Resistance in Considerations, Section IX, Chemotherapy of WHO/EMC/ZOO/97.4, Berlin, Germany, Campylobacter Jejuni and Campylobacter Microbial Diseases,’’ In: Goodman and October 13–17, 1997. coli,’’ Journal of Antimicrobial Gilman’s The Pharmacological Basis of 32. WHO, Use of Quinolones in Food Chemotherapy, vol. 35, pp. 173–178, 1995. Therapeutics, edited by J. Hardman, L. Animals and Potential Impact on Human 45. FDA, transcript of the joint meeting of Limbird, P. Molinoff, et al., 9th ed., The Health, Report of a WHO meeting, WHO/ the Veterinary Medicine Advisory Committee McGraw-Hill Companies, New York, p. 1039, EMC/ZDI/98.10, Geneva, Switzerland, June and Anti-infective Drugs Advisory 1996. 2–5, 1998. Committee, Gaithersburg, MD, May 12, 1994. 58. Sobel, J., R. Tauxe, A. Ries, C. Patton, 33. Endtz, H. P., G. J. Ruijs, B. van 46. FDA, ‘‘Guidance for Industry: and K. Maloney, The burden of Klingeren, W. H. Jansen, T. van der Reyden, Consideration of the Human Health Impact of Campylobacter Jejuni infections: A target for and R. P. Mouton, ‘‘Quinolone Resistance in the Microbial Effects of Antimicrobial New early treatment? 45th Annual Epidemic Campylobacter Isolated From Man and Animal Drugs Intended for Use in Food- Intelligence Service (EIS) Conference, Centers Poultry Following the Introduction of Producing Animals (GFI #78),’’ 64 FR 72083 for Disease Control and Prevention, Atlanta, Fluoroquinolones in Veterinary Medicine,’’ and 72084, December 23, 1999. GA, April 22–26, 1996. Journal of Antimicrobial Chemotherapy, vol. 47. Tollefson, L., F. J. Angulo, P. J. 59. Mead, P. S., L. Slutsker, V. Dietz, L. F. 27, pp. 199–208, 1991. Fedorka-Cray, ‘‘National Surveillance For McCaig, J. S. Bresee, C. Shapiro, P. M. Griffin, 34. Helmuth, R. and D. Protz, ‘‘How to Antibiotic Resistance in Zoonotic Enteric and R. V. Tauxe, ‘‘Food-related Illness and Modify Conditions Limiting Resistance in Pathogens,’’ In: Microbial Food Borne Death in the United States,’’ Emerging Bacteria in Animals and Other Reservoirs,’’ Pathogens, Veterinary Clinics of North Infectious Diseases, (5)5, pp. 607–625, 1999. Clinical Infectious Diseases, vol. 24 (Suppl. America: Food Animal Practice 14(1):141– 60. Council for Agricultural Science and 1), pp. S136–138, 1997. 150, 1998. Technology, risk characterization: estimated 35. Jacobs-Reitsma, W. F., C. A. Kan, and 48. Centers for Disease Control and numbers of illnesses and deaths, In: N. M. Boulder, ‘‘The Induction of Quinolone Prevention, 1998 Annual Report NARMS ‘‘Foodborne Pathogens: Risks and Resistance in Campylobacter Bacteria in National Antimicrobial Resistance Consequences,’’ task force report number Broilers By Quinolone Treatment,’’ Letters in Monitoring System: Enteric Bacteria. 122:40–52, 1994. Applied Microbiology, vol. 19, pp. 228–231, 49. Centers for Disease Control and 61. Lee, L. A., N. D. Puhr, E.K. Maloney, 1994. Prevention, 1999 Annual Report NARMS N. H. Bean, R. V. Tauxe, ‘‘Increase in 36. Rowe, B., Multiple Drug Resistance in National Antimicrobial Resistance Antimicrobial-resistant Salmonella Infections Salmonella:, The Threat to International Monitoring System: Enteric Bacteria. in the United States, 1989–1990,’’ Journal of Health, Wellcome Trust, 183 Euston Rd., 50. U.S. Department of Agriculture, Infectious Diseases, vol. 170, pp. 128–134, London, 53, May 18–21, 1997. Agricultural Research Service, 1998 1994. 37. Aarestrup, F. M., ‘‘Occurrence of Preliminary Data: NARMS National 62. Linden, P. K., A. W. Pasculle, R. Glycopeptide Resistance Among Antimicrobial Resistance Monitoring System: Manez, D. J. Kramer, J. J. Fung, A. D. Pinna, Enterococcus faecium Isolates From Enteric Bacteria—Animal Campylobacter and S. Kusne, ‘‘Differences in Outcomes for Conventional and Ecological Poultry Farms,’’ Isolate Report, Athens, GA, Personal Patients with Bacteremia Due to Microbial Drug Resistance, 1(3), pp. 255–257, communication Dr. P. Fedorka Cray. Vancomycin-resistant Enterococcus faecium 1995. 51. U. S. Department of Agriculture, or vancomycin-susceptible E. faecium,’’ 38. Bager, F., M. Madsen, J. Christensen, Agricultural Research Service, 1999 Clinical Infectious Diseases, vol. 22, pp. 663– and F. M. Aarestrup, ‘‘Avoparcin Used as a Preliminary Data: NARMS National 670, 1996.
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63. Deming, M., R. Tauxe, P. Blake et al., Division, Nationwide Raw Ground Chicken DEPARTMENT OF HEALTH AND ‘‘Campylobacter Enteritis at a University: Microbiological Survey pp 1–8, May 1996. HUMAN SERVICES Transmission From Eating Chicken and From 71. U.S. Department of Agriculture Food Cats,’’ American Journal of Epidemiology, Safety Inspection Service, Microbiology Food and Drug Administration vol. 126, no. 3, pp. 526–534, 1987. Division, Nationwide Raw Ground Turkey 64. Hopkins, R., R. Olmsted, and G. Istre, Microbiological Survey pp.1–8, May 1996. Advisory Committee; Renewals ‘‘Endemic Campylobacter jejuni Infection in 72. Doyle, M. and J. Schoeni, ‘‘Isolation of Colorado: Identified Risk Factors,’’ American Campylobacter Jejuni From Retail Journal of Public Health, 74(3), pp. 249–250, AGENCY: Food and Drug Administration, Mushrooms,’’ Applied and Environmental 1984. Microbiology, 51(2), pp. 449–50, 1986. HHS. 65. Skirrow, M. B., M. J. Blaser, ‘‘Clinical Aspects of Campylobacter Infection,’’ In: 73. Nachamkin, I., B. M. Allos, T. W. Ho, ACTION: Notice. Campylobacter, edited by I. Nachamkin and ‘‘Campylobacter Jejuni Infection and the Association With Guillain-Barre Syndrome,’’ M. Blaser, 2d ed., America Society SUMMARY: The Food and Drug In: Campylobacter, edited by I. Nachamkin Microbiology, Washington, DC, pp. 69–88, Administration (FDA) is announcing the 2000. and M. Blaser, 2d ed., American Society 66. Altekruse, S., N. Stern, P. Fields, and Microbiology, Washington, DC, pp. 155–175, renewals of certain FDA advisory D. Swerdlow, ‘‘Campylobacter Jejuni—an 2000. committees by the Commissioner of Emerging Foodborne Pathogen,’’ Emerging 74. Petruccelli, B. P., G. S. Murphy, J. L. Food and Drugs (the Commissioner). Infectious Diseases, 5(1), pp. 28–35, 1999. Sanchez, S. Walz, R. DeFraites, J. Gelnett, R. The Commissioner has determined that 67. Saeed, A., N. Harris, and R. DiGiacomo, L. Haberberger, P. Echeverria, and D. N. it is in the public interest to renew the ‘‘The Role of Exposure to Animals in the Taylor, ‘‘Treatment of Traveler’s Diarrhea charters of the committees listed below Etiology of Campylobacter Jejuni/coli With Ciprofloxacin and Loperamide,’’ for an additional 2 years beyond charter enteritis,’’ American Journal of Journal of Infectious Diseases, 165, pp. 557– Epidemiology, 137(1), pp. 108–114, 1993. 560, 1992. expiration date. The new charters will 68. Shane, S., ‘‘Campylobacteriosis,’’ In: 75. FDA, CVM, Guideline: General be in effect until the dates of expiration Diseases of Poultry, edited by B. Calnek, H. Principles for Evaluating the Safety of listed below. This notice is issued under Barnes, C. Beard, et al., 10th ed., Iowa State Compounds Used in Food-Producing the Federal Advisory Committee Act of University Press, Ames, pp. 235–245, 1997. Animals, July 1994. October 6, 1972 (Pubic Law 92–463 (5 69. U.S. Department of Agriculture Food Safety Inspection Service, Microbiology Dated: October 24, 2000. U.S.C. app. 2)). Division, Nationwide Broiler Chicken Stephen F. Sundlof, DATES: Authority for these committees Microbiological Baseline Data Collection Director, Center for Veterinary Medicine. Program, July 1994–June 1995 pp. 1–34, will expire on the dates indicated below April 1996. [FR Doc. 00–27832 Filed 10–26–00; 10:43 unless the Commissioner formally 70. U.S. Department of Agriculture Food am] determines that renewal is in the public Safety Inspection Service, Microbiology BILLING CODE 4160±01±F interest.
Name of committee Date of expiration
Gastrointestinal Drugs Advisory Committee March 3, 2002 Advisory Committee for Reproductive Health Drugs March 23, 2002 Arthritis Advisory Committee April 5, 2002 Veterinary Medicine Advisory Committee April 24, 2002 Anesthetic and Life Support Drugs Advisory Committee May 1, 2002 Blood Products Advisory Committee May 13, 2002 Pulmonary-Allergy Drugs Advisory Committee May 30, 2002 Drug Abuse Advisory Committee May 31, 2002 Science Advisory Board to the National Center for Toxicological Re- June 2, 2002 search Peripheral and Central Nervous System Drugs Advisory Committee June 4, 2002 Psychopharmacologic Drugs Advisory Committee June 4, 2002 Transmissible Spongiform Encephalopathies Advisory Committee June 9, 2002 Science Board to the Food and Drug Administration June 26, 2002 Allergenic Products Advisory Committee July 9, 2002 Cardiovascular and Renal Drugs Advisory Committee August 27, 2002 Endocrinologic and Metabolic Drugs Advisory Committee August 27, 2002 Oncologic Drugs Advisory Committee September 1, 2002
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FOR FURTHER INFORMATION CONTACT: ‘‘approved accreditation organization’’) number of laboratories accredited by an Donna M. Combs, Committee under the Clinical Laboratory approved accreditation organization as Management Office (HFA–306), Food Improvement Amendments of 1988 well as by any other means that HCFA and Drug Administration, 5600 Fishers (CLIA) program if the organization determines appropriate. Lane, Rockville MD 20857, 301–827– meets certain requirements. An II. Notice of Continued Approval of 5496. organization’s requirements for COLA as an Accreditation Organization Dated: October 23, 2000. accredited laboratories must be equal to, or more stringent than, the applicable Linda A. Suydam, In this notice, we approve COLA as an CLIA program requirements in 42 Code organization that may continue to Senior Associate Commissioner. of Federal Regulations (CFR), part 493 accredit laboratories for purposes of [FR Doc. 00–27835 Filed 10–30–00; 8:45 am] (Laboratory Requirements). Therefore, a establishing their compliance with CLIA BILLING CODE 4160±01±F laboratory accredited by an approved requirements. HCFA and Centers for accreditation organization that meets Disease Control and Prevention (CDC) and continues to meet all of the have examined the COLA application DEPARTMENT OF HEALTH AND accreditation organization’s HUMAN SERVICES and all subsequent submissions to requirements would be considered to determine equivalency with HCFA Health Care Financing Administration meet CLIA condition level requirements requirements under subpart E of part if it were inspected against CLIA 493 that an accreditation organization [HCFA±2118±N] regulations. The regulations listed in must meet to be granted approved status subpart E (Accreditation by a Private, under CLIA. We have determined that Medicare, Medicaid, and CLIA Nonprofit Accreditation Organization or COLA has complied with the applicable Programs; Continuance of the Exemption Under an Approved State CLIA requirements as of October 31, Approval of COLA as a CLIA Laboratory Program) of part 493 specify 2000, and grant COLA approval as an Accreditation Organization the requirements an accreditation accreditation organization under AGENCY: Health Care Financing organization must meet to be an subpart E, through August 31, 2002, for Administration (HCFA), HHS. approved accreditation organization. the following specialty/subspecialty ACTION: Notice. HCFA approves an accreditation areas: organization for a period not to exceed • Bacteriology. SUMMARY: This notice announces the 6 years. • continued approval of COLA (formerly In general, the approved accreditation Mycobacteriology. the Commission on Office Laboratory organization must among other • Mycology. Accreditation) as an accreditation conditions and requirements: • Parasitology. organization for laboratories under the • Use inspectors qualified to evaluate • Virology. Clinical Laboratory Improvement laboratory performance and agree to • Syphilis Serology. inspect laboratories with the frequency Amendments of 1988 (CLIA) program. • General Immunology. We have found that the accreditation determined by HCFA. • • Apply standards and criteria that Routine Chemistry. process of this organization provides • reasonable assurance that the are equal to or more stringent than those Endocrinology. • laboratories accredited by it meet the condition level requirements Toxicology. conditions required by CLIA law and established by HCFA when taken as a • Urinalysis. regulations. Consequently, laboratories whole. • Hematology. • that voluntarily become accredited by Provide reasonable assurance that • Immunohematology. these standards and criteria are COLA in lieu of direct Federal oversight As a result of this determination, any and continue to meet COLA continually met by its accredited laboratories; laboratory that is accredited by COLA requirements would meet the CLIA • during this time period for an approved condition level requirements for Provide HCFA with the name of any laboratory that has had its accreditation specialty/subspecialty (listed above) is laboratories and, therefore, are not deemed to meet the applicable CLIA subject to routine inspection by State denied, suspended, withdrawn, limited, or revoked within 30 days of the action condition level requirements for the survey agencies to determine their laboratories found in part 493 and, compliance with CLIA requirements. taken. • Notify HCFA in writing at least 30 therefore, is not subject to routine They are, however, subject to Federal days before the effective date of any inspection by a State survey agency to validation and complaint investigation proposed changes in its standards. determine its compliance with CLIA surveys. • If HCFA withdraws its approval, requirements. The accredited laboratory, EFFECTIVE DATE: This notice is effective notify the accredited laboratories of the however, is subject to validation and for the period October 31, 2000, through withdrawal within 10 days of the complaint investigation surveys December 31, 2002. withdrawal. A laboratory can be performed by HCFA, or by any other FOR FURTHER INFORMATION CONTACT: Val accredited if, among other things, it Federal or State or local public agency Coppola, (410) 786–3531. meets the standards of an approved or nonprofit private organization under SUPPLEMENTARY INFORMATION: accreditation organization and an agreement with the Secretary. authorizes the accreditation body to III. Evaluation of COLA I. Background and Legislative submit to HCFA records and other Authority information HCFA may require. The following describes the process On July 31, 1992, HCFA issued a final Along with requiring the used to determine that COLA, as a rule (57 FR 33992). Under section promulgation of criteria for approving private, nonprofit organization, provides 353(e)(2) of the Public Health Service the accreditation body and for reasonable assurance that laboratories it Act (PHSA), HCFA may approve a withdrawing this approval, CLIA accredits will meet the applicable private, nonprofit organization to requires HCFA to perform an annual requirements of the CLIA and applicable accredit clinical laboratories (an evaluation by inspecting a sufficient regulations.
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A. Requirements for Approving an well as data related to the PT failures, • Authorize the organization to Accreditation Organization Under CLIA within 30 days of the initiation of the release to HCFA all records and To determine whether we should action. information required. —The ability of the organization to • grant approved status to COLA as a Permit inspections as required by provide HCFA with electronic data for private, nonprofit organization for the CLIA regulations in part 493, all its accredited laboratories and the accrediting laboratories under CLIA for subpart Q (Inspection). areas of specialty and subspecialty the specific specialty or subspecialty • Obtain a certificate of accreditation testing. as required by § 493.55 (Application for areas of human specimen testing it —The adequacy of the numbers of staff requested, we conducted a detailed and registration certificate and certificate of and other resources. accreditation). in-depth comparison of COLA’s —The organization’s ability to provide requirements for its laboratories to those adequate funding for performing the B. Evaluation of the COLA Request for of CLIA. In summary, we evaluated required inspections. Continued Approval as an Accreditation whether COLA meets the following • The organization’s agreement with Organization under CLIA requirements: HCFA that requires it, among other • Provides reasonable assurance to us HCFA has verified COLA’s assurance things, to meet the following that it requires the laboratories it that it requires the laboratories it requirements: accredits to meet requirements that are accredits to be, and that the organization equal to or more stringent than the CLIA —Notify HCFA of any laboratory that is, in compliance with the following has had its accreditation denied, condition level requirements (for the subparts of part 493 as explained below: limited, suspended, withdrawn, or requested specialties/subspecialties) revoked by the accreditation Subpart E—Accreditation by a Private, and would, therefore, meet the organization, or that has had any Nonprofit Accreditation Organization or condition level requirements of CLIA if other adverse action taken against it Exemption Under an Approved State those laboratories had not been granted by the accreditation organization Laboratory Program deemed status and had been inspected within 30 days of the action taken. COLA has submitted a list of the against condition level requirements. —Notify HCFA within 10 days of a • specialties and subspecialties that it Meets the applicable requirements deficiency identified in an accredited would continue to accredit, a of Subpart E. laboratory if the deficiency poses an As specified in the regulations of description of its inspection process and immediate jeopardy to the guidelines, PT monitoring process, and subpart E, HCFA review of a private, laboratory’s patients or a hazard to the its data management and analysis nonprofit accreditation organization general public. seeking approved status under CLIA —Notify HCFA of all newly accredited system, a listing of the size, includes, but is not limited to, an laboratories, or laboratories whose composition, education and experience evaluation of the following: of its inspection teams, its investigative • areas of specialty or subspecialty are Whether the organization’s revised, within 30 days. and complaint response procedures, its requirements for its accredited —Notify each laboratory accredited by notification agreements with HCFA, its laboratories are equal to or more the organization within 10 days of removal or withdrawal of laboratory stringent than the condition level HCFA’s withdrawal of approval of the accreditation procedures, its current list requirements of the CLIA regulations. organization. of accredited laboratories, and its • The organization’s inspection —Provide HCFA with inspection announced or unannounced inspection process to determine: schedules, as requested, for the process. We have determined that COLA —The composition of the inspection purpose of conducting onsite has complied with the requirements teams, qualifications of the inspectors, validation inspections. under CLIA for approval as an and the ability of the organization to —Provide HCFA or our agent, or the accreditation organization under this provide continuing education and State survey agency with any facility- subpart. training to all of its inspectors; specific data that includes, but is not Subpart H—Participation in Proficiency limited to, PT results that constitute —The comparability of the Testing for Laboratories Performing unsuccessful participation in an organization’s full inspection and Tests of Moderate or High Complexity, approved PT program and notification complaint inspection requirements to or Both the Federal requirements including of the adverse actions or corrective but not limited to inspection actions imposed by the accreditation COLA’s requirements for PT are frequency, and the ability to organization as a result of equivalent to those of CLIA. unsuccessful PT participation. investigate and respond to complaints Subpart J—Patient Test Management for —Provide HCFA with written against its accredited laboratories. Moderate or High Complexity Testing, notification at least 30 days in —The organization’s procedures for or Both monitoring laboratories that it has advance of the effective date of any found to be out of compliance with its proposed changes in its requirements. COLA has revised its requirements to requirements. —Provide upon the request by any equal the CLIA requirements at —The ability of the organization to person, on a reasonable basis (under §§ 493.1101 through 493.1111 on an provide HCFA with electronic data State confidentiality and disclosure overall basis. and reports that are necessary for requirements, if applicable), any Subpart K—Quality Control for Tests of effective validation and assessment of laboratory’s PT results with the Moderate or High Complexity, or Both the organization’s inspection process. explanatory information needed to —The ability of the organization to assist in the interpretation of the The quality control (QC) requirements provide HCFA with electronic data, results. of COLA have been evaluated against related to the adverse actions Laboratories that are accredited by an the applicable requirements of CLIA and resulting from unsuccessful approved accreditation organization its implementing regulations. We have proficiency testing (PT) participation must, among other things, meet the determined that COLA’s requirements, in HCFA approved PT programs, as following requirements: when taken as a whole, are equal to or
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We also RIN 0938±AK26 requirements to be equal to the CLIA conduct a review when the validation personnel requirements. review findings, irrespective of the rate Medicare Program; Criteria and Subpart P—Quality Assurance for of disparity (as defined in § 493.2), Standards for Evaluating Intermediary Moderate or High Complexity Testing or indicate systemic problems in the and Carrier Performance During Fiscal Both organization’s processes that provide Year 2001 We have determined that COLA’s evidence that the organization’s requirements, taken as a whole, are no AGENCY: Health Care Financing requirements are equal to the CLIA Administration (HCFA), Health and requirements of this subpart. longer equivalent to the CLIA requirements, taken as a whole. Human Services (HHS). Subpart Q—Inspections ACTION: General notice with comment If HCFA determines that COLA has period. We have determined that COLA’s failed to adopt or maintain requirements inspection requirements are equal to the that are equal to or more stringent than SUMMARY: This notice describes the requirements of this subpart. the CLIA requirements, or systemic criteria and standards to be used for Subpart R—Enforcement Procedures for problems exist in its inspection process, evaluating the performance of fiscal Laboratories a probationary period, not to exceed 1 intermediaries and carriers in the administration of the Medicare program COLA meets the requirements of year, may be given to COLA to adopt beginning October 1, 2000. The results subpart R to the extent it applies to equal or more stringent requirements. of these evaluations are considered accreditation organizations. COLA HCFA will make a determination as to whenever we enter into, renew, or policy stipulates the action it takes whether or not COLA retains its terminate an intermediary agreement or when laboratories it accredits do not approved status as an accreditation carrier contract or take other contract comply with its requirements. COLA organization under CLIA. If approved actions, for example, assigning or shall suspend, withdraw, revoke, or status is withdrawn, an accreditation reassigning providers or services to an limit accreditation of a laboratory as organization such as COLA may intermediary or designating regional or appropriate and report the action to resubmit its application if it revises its national intermediaries. We are HCFA within 30 days. COLA also program to address the rationale for the requesting public comment on these provides an appeals process for denial, demonstrates that it can criteria and standards. laboratories that have had accreditation reasonably assure that its accredited EFFECTIVE DATE: The criteria and denied. laboratories meet CLIA condition level standards are effective October 1, 2000. We have determined that COLA’s requirements, and resubmits its COMMENTS: laboratory enforcement and appeal application for approval as an Comments will be considered if we receive them at the policies are essentially equivalent to the accreditation organization in its appropriate address as provided below requirements of this subpart as they entirety. If, however, an approved no later than 5 p.m. (EDT) on November apply to accreditation organizations. accreditation organization requests 30, 2000. IV. Federal Validation Inspections and reconsideration of an adverse ADDRESSES: Mail written comments (1 Continuing Oversight determination in accordance with original and 3 copies) to the following subpart D (Reconsideration of Adverse The Federal validation inspections of address: Health Care Financing, COLA accredited laboratories may be Determinations—Deeming Authority for Administration, Department of Health conducted on a representative sample Accreditation Organizations and CLIA and Human Services, Attention: HCFA– basis or in response to substantial Exemption of Laboratories Under State 4010–GNC, P.O. Box 8016, Baltimore, allegations of noncompliance Programs) of part 488 (Survey, MD 21244–8016. (complaint inspections). The outcome of Certification, and Enforcement If you prefer, you may deliver your those validation inspections, performed Procedures) of our regulations, it may written comments (1 original and 3 by HCFA or our agent, or the State not submit a new application until copies) to one of the following survey agency, will be HCFA’s principal HCFA issues a final reconsideration addresses: means for verifying that the laboratories determination. Room 443–G, Hubert H. Humphrey accredited by COLA remain in Should circumstances result in COLA Building, 200 Independence Avenue, compliance with CLIA requirements. having its approval withdrawn, HCFA SW., Washington, DC, or This Federal monitoring is an ongoing will publish a notice in the Federal Room C5–16–03, 7500 Security Boulevard, Baltimore, Maryland. process. Register explaining the basis for Because of staffing and resource V. Removal of Approval as an removing its approval. limitations, we cannot accept comments Accrediting Organization Authority: Section 353 of the Public Health by facsimile (FAX) transmission. When Our regulations provide that we may Service Act (42 U.S.C. 263a). commenting, please refer to file code remove the approval of an accreditation Dated: September 18, 2000. HCFA–4010–GNC. Comments received organization, such as that of COLA, for timely will be available for public Nancy-Ann Min-DeParle, cause, before the end of the effective inspection as they are received, date of approval. If validation Administrator, Health Care Financing generally beginning approximately 3 inspection outcomes and the Administration. weeks after publication of a document, comparability or validation review [FR Doc. 00–27956 Filed 10–30–00; 8:45 am] in Room 443–G of the Department’s produce findings as described in BILLING CODE 4120±01±P office at 200 Independence Avenue,
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SW., Washington, DC, on Monday C. Development and Publication of II. Analysis of and Response to Public through Friday of each week from 8:30 Criteria and Standards Comments Received on FY 2000 a.m. to 5 p.m. (phone: (202) 690–7890). In addition to the statutory Criteria and Standards FOR FURTHER INFORMATION CONTACT: Sue requirements, 42 CFR 421.120 and We received a total of 19 comments in Lathroum, (410) 786–7409. 421.122 provide for publication of a response to the Federal Register notice Federal Register notice to announce published on December 3, 1999. All SUPPLEMENTARY INFORMATION: criteria and standards for intermediaries comments were reviewed, but none I. Background prior to implementation. Section necessitated our reissuance of the FY 421.201 provides for publication of a 2000 Criteria and Standards. Medicare A. Part A—Hospital Insurance Federal Register notice to announce program components were advised of criteria and standards for carriers prior the concerns as appropriate. When Under section 1816 of the Social to implementation. The current criteria warranted, revisions have been Security Act (the Act), public or private and standards were published in the incorporated in this Federal Register organizations and agencies participate Federal Register on December 3, 1999 at notice. We are responding to the in the administration of Part A (Hospital 64 FR 67920. following performance evaluation Insurance) of the Medicare program To the extent possible, we make every issues: under agreements with us. These effort to publish the criteria and Comment: We were advised that the agencies or organizations, known as standards before the beginning of the Blue Cross and Blue Shield Medicare fiscal intermediaries, determine whether Federal FY, which is October 1. If we do contractors have a different scope of medical services are covered under not publish a Federal Register notice work for fraud and abuse (F&A) Medicare, determine correct payment before the new FY begins, readers may activities than the commercial amounts and then make payments to the presume that until and unless notified contractors. As a result, Blue Cross and health care providers (for example, otherwise, the criteria and standards Blue Shield Plans’ performance would hospitals, skilled nursing facilities that were in effect for the previous FY need to be evaluated against the (SNFs), community mental health remain in effect. In those instances in negotiated scope of work, not our centers, etc.) on behalf of the which we are unable to meet our goal manuals, since not all of our manual beneficiaries. Section 1816(f) of the Act of publishing the subject Federal requirements are addressed in the requires us to develop criteria, Register notice before the beginning of contract amendment. standards, and procedures to evaluate the FY, we may publish the criteria and Response: While it is true that there an intermediary’s performance of its standards notice at any subsequent time are some differences between functions under its agreement. during the year. If we choose to publish performance expectations for Blue Cross Evaluations of Medicare fee-for-service a notice in this manner, the evaluation and Blue Shield Plans as opposed to performance need not be limited to the period for any such criteria and commercial contractors, the protocols current fiscal year (FY), other fixed term standards that are the subject of the used for evaluation of F&A activities in basis, or agreement term. We may notice will be revised to be effective on FY 2000 did not contain performance evaluate performance using a time frame the first day of the first month following expectations that were not already that does not mirror the FY or other publication. Any revised criteria and contained in the Blue Cross and Blue fixed term. The evaluation of standards will measure performance Shield Medicare contract. intermediary performance is part of our prospectively; that is, we will not apply Comment: We were advised that contract management process. new measurements to assess references under the Fiscal performance on a retroactive basis. Responsibility Criterion relating to the B. Part B Medical Insurance It is not our intention to revise the evaluation of a contractor’s adherence to criteria and standards that will be used the Chief Financial Officers’ Act (CFO), Under section 1842 of the Act, we are during the evaluation period once this 31 USC 503, et seq. are incorrect. The authorized to enter into contracts with information has been published in a expectation to comply with this law is carriers to fulfill various functions in Federal Register notice. However, on applicable to us, not the contractors. the administration of Part B occasion, either because of The expectation should be reworded to (Supplementary Medical Insurance) of administrative action or congressional reflect that contractors assist the the Medicare program. Beneficiaries, mandate, there may be a need for Secretary with being compliant with the physicians, and suppliers of services changes that have direct impact upon CFO Act. submit claims to these carriers. The the criteria and standards previously Response: We agree that the carriers determine whether the services published, or that require the addition requirement referenced in the above are covered under Medicare and the of new criteria or standards, or that comment is applicable to us and not to payable amount for the services or cause the deletion of previously the contractors. The FY 2001 Federal supplies, and then make payment to the published criteria and standards. If we Register notice has been revised to appropriate party. Under section must make these changes, we will correctly reflect language as contained 1842(b)(2) of the Act, we are required to publish a Federal Register notice prior in the contract. Language in the Federal develop criteria, standards, and to implementation of the changes. In all Register notice now specifically procedures to evaluate a carrier’s instances, necessary manual issuances references the Federal Managers’ performance of its functions under its will be published to ensure that the Financial Integrity Act (FMFIA), 31 contract. Evaluations of Medicare fee- criteria and standards are applied U.S.C. 1105, et seq; rather than the CFO for-service performance need not be uniformly and accurately. Also, as in Act and also states that contractors must limited to the current FY, other fixed previous years, this Federal Register cooperate with us in complying with the term basis, or contract term. We may notice will be republished and the FMFIA. evaluate performance using a timeframe effective date revised if changes are Comment: We were advised that the that does not mirror the FY. The warranted as a result of the public Agency issued a moratorium on the evaluation of carrier performance is part comments received on the criteria and review of all demand bills because of of our contract management process. standards. the SNF prospective payment system
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(PPS). It was suggested that we objectives. The first criterion is ‘‘Claims Intermediaries and carriers may also be acknowledge that the standard would Processing,’’ which measures evaluated on any Medicare Integrity not be evaluated until the Agency contractual performance against claims Program (MIP) activities if performed issued instructions and intermediaries processing accuracy and timeliness under their Part A agreement or Part B had a chance to train staff on such. requirements. Within the Claims contract. Response: The moratorium on the Processing criterion, we have identified The fourth criterion is ‘‘Fiscal review of all demand bills was lifted, those performance standards that are Responsibility,’’ which evaluates the and we issued appropriate instructions mandated by either legislation, contractor’s efforts to protect the in March 2000. regulation, or judicial decision. These Medicare program and the public Comment: HCFA was advised that the standards include claims processing interest. Contractors must effectively carrier Customer Service criterion states timeliness, the accuracy of Explanations manage Federal funds for both the that carriers are to achieve a monthly of Medicare Benefits (EOMBs) or payment of benefits and costs of All Trunks Busy (ATB) Rate of not more Medicare Summary Notices (MSNs), the administration under the Medicare than 5 percent. For callers choosing to rate of cases reversed by the program. Proper financial and budgetary speak with a customer service Administrative Law Judge (ALJ), the controls, including internal controls, representative, 97.5 percent or more of timeliness of intermediary must be in place to ensure contractor the calls are to be answered within 120 reconsideration cases and the timeliness compliance with its agreement with seconds; no less than 85 percent are to of carrier reviews and hearings. Further HHS and HCFA. Additional functions be answered within the first 60 seconds. evaluation in the Claims Processing reviewed under this criterion may A question was raised as to whether this criterion may include, but is not limited include, but are not limited to, requirement applies only to call centers to, the accuracy of bill and claims adherence to approved budget, servicing beneficiaries (and providers, if processing, the level of electronic claims compliance with the BPRs, and the call centers are not separate). payment, the percent of bills and claims financial reporting requirements. Response: The telephone service paid with interest, and the accuracy of The fifth and final criterion is requirement referenced in the above reconsiderations, reviews, and hearings. ‘‘Administrative Activities,’’ which comment is applicable to call centers The second criterion is ‘‘Customer measures a contractor’s administrative servicing beneficiaries (and providers if Service,’’ which assesses the management of the Medicare program. the centers are not separate). The completeness of the service provided to A contractor must efficiently and requirement is not applicable to call customers by the contractor in its effectively manage its operations to centers that specifically service administration of the Medicare program. ensure constant improvement in the providers. Mandated standards in the Customer way it does business. Proper systems III. Criteria and Standards—General Service criterion include timeliness of security (general and application carrier replies to beneficiary telephone controls), Automated Data Processing Basic principles of the Medicare inquiries and the accuracy and clarity of (ADP) maintenance, and disaster program are to pay claims promptly and responses to written inquiries. In FY recovery plans must be in place. A accurately and to foster good beneficiary 2001, customer feedback may be used to contractor’s evaluation under the and provider relations. Contractors must collect comparable data on customer Administrative Activities criterion may administer the Medicare program satisfaction and identify areas in need of include, but is not limited to, efficiently and economically. The goal improvement. Further evaluation of establishment, application, of performance evaluation is to ensure services under this criterion may documentation, and effectiveness of that contractors meet their contractual include, but is not limited to, a review internal controls, which are essential in obligations. We measure contractor of beneficiary relations; provider all aspects of a contractor’s operation performance to ensure that contractors education; appropriateness of telephone and the degree to which the contractor do what is required of them by law, inquiry responses; and walk-in service. cooperates with us in complying with regulation, contract and our directives. The third criterion is ‘‘Payment the FMFIA. Administrative Activities We have developed a contractor Safeguards,’’ which evaluates whether evaluations may also include reviews management program for FY 2001 that the Medicare Trust Fund is safeguarded related to implementation of change outlines expectations of the contractor; against inappropriate program management instructions and data and measures the performance of the expenditures. Intermediary and carrier reporting requirements. contractor; evaluates the performance performance may be evaluated in the We have also developed separate against the expectations; and, takes areas of medical review (MR), Medicare measures for evaluating unique appropriate contract action based upon secondary payer (MSP), F&A (also activities of Regional Home Health the evaluation of the contractor’s referred to as benefits integrity (BI)), Intermediaries (RHHIs). Section performance. We work to develop and overpayments (OP) , provider 1816(e)(4) of the Act requires us to refine measurable performance enrollment (PE), and audit and designate regional agencies or standards in key areas in order to better reimbursement (A&R). Mandated organizations, which are already evaluate contractor performance. In performance standards in the Payment Medicare intermediaries under section addition to evaluating performance Safeguards criterion are the accuracy of 1816, to perform bill processing based upon expectations for FY 2001, decisions on SNF demand bills, and the functions with respect to freestanding we may conduct follow-up evaluations timeliness of processing Tax Equity and home health agency (HHA) bills. The in areas when contractor performance Fiscal Responsibility Act (TEFRA) target law requires that we limit the number was out of compliance with laws, rate adjustments, exceptions, and of these regional intermediaries (RHHIs) regulations, and our performance exemptions. Further evaluation in this to not more than 10; see 42 CFR 421.117 expectations during FY 2000, thus criterion may include, but is not limited and the final rule published in the having required the contractor to submit to, review of the efficient and effective Federal Register on May 19, 1988 at 53 a Performance Improvement Plan (PIP). compilation and analysis of data to FR 17936 for more details about the We have structured the FY 2001 bring about continuous improvement in RHHIs. Contractor Performance Evaluation into a contractor’s efforts to safeguard We have developed separate measures five criteria designed to meet those Medicare program dollars. for RHHIs in order to evaluate the
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Specifically, clean, Standard 1—Decisions on SNF order to ensure effective and efficient non-PIP electronic claims can be paid as demand bills are accurate. administration of the program benefit. early as the 14th day (13 days after the Standard 2—TEFRA target rate Below, we list the criteria and date of receipt) and must be paid by the adjustments, exceptions, and standards to be used for evaluating the 31st day (30 days after the date of exemptions are processed within performance of intermediaries and receipt). mandated time frames. Specifically, carriers. In several instances, we Standard 2: 95 percent of clean paper applications must be processed to identify a Medicare manual as a source non-PIP bills paid within specified time completion within 75 days after receipt of more detailed requirements. frames. Specifically, clean, non-PIP by the contractor or returned to the Intermediaries and carriers have copies paper claims can be paid as early as the hospitals as incomplete within 60 days of various Medicare manuals referenced 27th day (26 days after the date of of receipt. in this notice. Members of the public receipt) and must be paid by the 31st Intermediaries may also be evaluated also have access to our manualized day (30 days after the date of receipt). on any MIP activities if performed instructions. Standard 3: Reversal rate by under their Part A agreement. These Medicare manuals are available for Administrative Law Judge (ALJ) is functions and activities include, but are review at local Federal Depository acceptable. We have defined an not limited to— • Libraries (FDLs). Under the FDL acceptable reversal rate by an ALJ as one Medical Review. • Program, government publications are that is at or below 5.0 percent. Applying analytical skills and sent to approximately 1,400 designated Standard 4: 75 percent of focusing resources on particular public libraries throughout the United reconsiderations are processed within providers or claim types that represent States. Interested parties may examine 60 days and 90 percent are processed unnecessary or inappropriate care. • the documents at any one of the FDLs. within 90 days. Developing local and national data Some may have arrangements to transfer Additional functions may be that identify aberrancies and form the material to a local library not designated evaluated under this criterion. These basis of corrective actions, such as as a FDL. To locate the nearest FDL, functions include, but are not limited to, educating the provider, or become the individuals should contact any public the— basis of medical review policies or library. • Bill processing accuracy; review screens as directed by Medicare In addition, individuals may contact • Establishment and maintenance of program manuals and BPR regional depository libraries, which relationship with Common Working File requirements. • receive and retain at least one copy of (CWF) Host; Making decisions that comply with nearly every Federal government • Management of shared processing current coverage guidelines. • publication, either in printed or sub-contract; Developing means of addressing • microfilm form, for use by the general Analysis and validation of data; and aberrancies identified during the • public. These libraries provide reference Accuracy of processing analysis of all local and national data. reconsideration cases with clear • Medicare Secondary Payer. services and interlibrary loans; however, • they are not sales outlets. Individuals responses and appropriate customer- Identifying and recovering mistaken may obtain information about the friendly tone and clarity. Medicare payments in accordance with appropriate Medicare Intermediary location of the nearest regional B. Customer Service Criterion depository library from any library. Manual instructions and other pertinent We may review the intermediary’s Information may also be obtained from HCFA general instructions. efforts to enhance customer satisfaction • the following web site: www.hcfa.gov/ Accurately reporting savings and through the use of customer feedback. pubforms/progman.htm. Some manuals following claim development Results of the feedback may be used to may be obtained from the following web procedures. establish comparable data on customer • site: www.hcfa.gov/pubforms/ Prioritizing and processing satisfaction and to identify areas in need p2192toc.htm. Finally, all of our recoveries in compliance with of improvement. The results may be Regional Offices (RO) maintain all instructions. summarized for publication in the • Fraud and Abuse (also known as Medicare manuals for public inspection. Report of Contractor Performance (RCP) BI). To find the location of the nearest and shared with individual contractors. • Identifying fraud cases that exist available HCFA RO, you may call the Functions that may be evaluated within the intermediary’s service area individual listed at the beginning of this under this criterion include, but are not and taking appropriate actions to notice. That individual can also provide limited to— dispose of these cases. information about purchasing or • Accuracy, timeliness and • Investigating allegations of fraud subscribing to the various Medicare appropriateness of responses to made by beneficiaries, providers, HCFA, manuals. telephone inquiries; Office of Inspector General (OIG), and IV. Criteria and Standards for • Accuracy and timeliness of other sources. Intermediaries responses to written inquiries with • Putting in place effective fraud appropriate customer-friendly tone and detection and deterrence programs. A. Claims Processing Criterion clarity; • Overpayments. The Claims Processing criterion • Establishment and maintenance of • Collecting Medicare debts timely. contains 4 mandated standards. relationships with professional and • Accurately reporting overpayments Standard 1: 95 percent of clean beneficiary organizations; to HCFA.
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• Adhering to our instructions for • Data and reporting requirements We may review the carrier’s efforts to management of Medicare Trust Fund implementation; and enhance customer satisfaction through debts. • Internal controls establishment and the use of customer feedback. Results of • Provider Enrollment. use, including the degree to which the the feedback may be used to establish • Complying with assignment of staff contractor cooperates with the Secretary comparable data on customer to the provider enrollment function and in complying with the FMFIA. satisfaction and to identify areas in need training the staff in procedures and of improvement. The results may be V. Criteria and Standards for Carriers verification techniques. summarized for publication in the RCP • Complying with the operational A. Claims Processing Criterion and shared with individual contractors. standards relevant to the process for Additional functions may be enrolling providers. The Claims Processing criterion • contains five mandated standards. evaluated under this criterion. These Audit and Reimbursement. functions include, but are not limited to, • Performing the activities specified Standard 1: 95 percent of clean the carrier’s— in our general instructions for electronically submitted claims • Accuracy and appropriateness of conducting audit and settlement of processed within statutorily specified time frames. Specifically, clean responses to telephone inquiries; Medicare cost reports. • • Settling Medicare cost reports electronic claims can be paid as early as Establishment and maintenance of timely and accurately in establishing the 14th day (13 days after the date of relationships with professional and receipt) and must be paid by the 31st beneficiary organizations; interim provider payments. • day (30 days after the date of receipt). Use of focus groups; • D. Fiscal Responsibility Criterion Standard 2: 95 percent of clean paper Conduct of educational and We may review the intermediary’s claims processed within specified time outreach efforts; and • efforts to establish and maintain frames. Specifically, clean paper claims Walk-in services. appropriate financial and budgetary can be paid as early as the 27th day (26 C. Payment Safeguards Criterion internal controls over benefit payments days after the date of receipt) and must and administrative costs. Proper be paid by the 31st day (30 days after Carriers may be evaluated on any MIP internal controls must be in place to the date of receipt). activities if performed under their Part ensure that contractors comply with Standard 3: 98 percent of EOMBs and B contracts. In addition other carrier their agreements with us. MSNs are properly generated. functions and activities that may be Additional matters to be reviewed Standard 4: 95 percent of review reviewed under this criterion include, under the Fiscal Responsibility criterion determinations are accurate and clear but are not limited to— • may include, but are not limited to— with appropriate customer-friendly tone Medical Review. • • Adherence to approved program and clarity, and are completed within Applying their analytical skills and management and MIP budgets; 45 days. focusing resources on particular • Compliance with the BPRs; providers or claim types that represent • Standard 5: 90 percent of carrier Compliance with financial hearing decisions are accurate and clear unnecessary or inappropriate care. reporting requirements and; • Developing effective means of • with appropriate customer-friendly tone Control of administrative cost and and clarity, and are completed within addressing aberrancies identified benefit payments. 120 days. through analyzing data to target prepay E. Administrative Activities Criterion Additional functions may be and postpay review. • Using medical coverage guidelines We may measure an intermediary’s evaluated under this criterion. These functions include, but are not limited to, to determine if each medical review administrative ability to manage the screen is supported by sufficient Medicare program. We may evaluate the the— • Claims Processing accuracy; documentation. efficiency and effectiveness of its • • Developing means of addressing operations, its system of internal Management of shared processing sub-contract; aberrancies identified during the controls, and its compliance with our • analysis of all local and national data. directives and initiatives. Establishment and maintenance of • Medicare Secondary Payer. We may measure an intermediary’s relationship with the CWF Host; and • • Identifying and recovering mistaken efficiency and effectiveness in managing Analysis and validation of data. Medicare payments in accordance with its operations to ensure constant B. Customer Service Criterion the appropriate Medicare Carriers improvement in the way it does Manual instructions, and other business. Proper systems security The Customer Service criterion contains two mandated standards. pertinent HCFA general instructions. (general and application controls), ADP • maintenance, and disaster recovery Standard 1—Telephone inquiries are Accurately reporting savings and plans must be in place. An intermediary answered timely. following claim development Carriers are to achieve a monthly ATB procedures. must also test system changes to ensure • the accurate implementation of our Rate of not more than 10%. For callers Prioritizing and processing instructions. choosing to speak with a customer recoveries in compliance with service representative, 97.5% or more of instructions. Our evaluation of an intermediary • under the Administrative Activities telephone calls are to be answered Fraud and Abuse (also known as within 120 seconds; no less than 85% BI). criterion may include, but is not limited • to, reviews of its— are to be answered within the first 60 Identifying fraud and abuse cases • Systems security; seconds. that exist within the carrier’s service • ADP maintenance (configuration Standard 2—Accuracy and timeliness area and taking appropriate actions to management, testing, change of responses to written inquiries with dispose of these cases. management, security, etc.); appropriate customer-friendly tone and • Investigating allegations of fraud • Disaster recovery plan; clarity. Responses to beneficiary written and/or abuse made by beneficiaries, • Change management plan inquiries are written at an appropriate providers, HCFA, OIG, and other implementation; reading level. sources.
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• Putting in place effective fraud and • Internal controls establishment and fictitious, or fraudulent certification abuse detection and deterrence use including the degree to which the may be subject to criminal and/or civil programs. contractor cooperates with the Secretary prosecution, as well as appropriate • Overpayments. in complying with the FMFIA. administrative action. This • Collecting Medicare debts timely. administrative action may include VI. Criterion and Standards for RHHIs • Accurately reporting overpayments debarment or suspension of the to HCFA. The following standards are mandated contractor, as well as the termination or • Adhering to our instructions for for the RHHI criterion: nonrenewal of a contract. management of Medicare Trust Fund Standard 1: 95 percent of clean If a contractor meets the level of debts. electronically submitted non-PIP HHA/ performance required by operational • Provider Enrollment hospice bills are paid within statutorily instructions, it meets the requirements • Complying with assignment of staff specified time frames. Specifically, of that criterion. Any performance to the provider enrollment function and clean, non-PIP electronic claims can be measured below basic operational training staff in procedures and paid as early as the 14th day (13 pays requirements constitutes a program verification techniques. after the date of receipt) and must be deficiency. The contractor will be • Complying with the operational paid by the 31st day (30 days after the required to develop and implement a standards relevant to the process for date of receipt). PIP for each program deficiency Standard 2: 95 percent of clean paper enrolling providers. identified. The contractor will be non-PIP HHA/hospice bills are paid monitored to ensure effective and D. Fiscal Responsibility Criterion within specified time frames. efficient compliance with the PIP, and Specifically, clean, non-PIP paper We may review the carrier’s efforts to to ensure improved performance when claims can be paid as early as the 27th establish and maintain appropriate requirements are not met. The day (26 days after the date of receipt) financial and budgetary internal contractor will also be monitored when and must be paid by the 31st day (30 controls over benefit payments and a program vulnerability in any days after the date of receipt). administrative costs. Proper internal performance area is identified. A Standard 3: 75 percent of HHA/ controls must be in place to ensure that program vulnerability exists when a hospice reconsiderations are processed contractors comply with their contractor’s performance complies with within 60 days and 90 percent are agreements with us. basic program requirements, but one or processed within 90 days. Additional matters to be reviewed more weaknesses are present that could under the Fiscal Responsibility criterion We may use this criterion to review a RHHI’s performance with respect to result in deficient performance if left may include, but are not limited to— ignored. • Adherence to approved program handling the HHA/hospice workload. This includes processing HHA/hospice The results of performance management and MIP budgets; evaluations and assessments under all • Compliance with the BPRs; bills timely and accurately; properly five criteria will be used for contract • Compliance with financial paying and settling HHA cost reports; management activities and will be reporting requirements; and and timely and accurately processing published in the contractor’s annual • Control of administrative cost and reconsiderations from beneficiaries, performance report. We may initiate benefit payments. HHAs, and hospices, interim rate setting, and accuracy of MR coverage administrative actions as a result of the E. Administrative Activities Criterion decisions. evaluation of contractor performance We may measure a carrier’s based on these performance criteria. VII. Action Based on Performance administrative ability to manage the Under sections 1816 and 1842 of the Evaluations Medicare program. We may evaluate the Act, we consider the results of the efficiency and effectiveness of its We evaluate a contractor’s evaluation in our determinations operations, its system of internal performance against applicable program when— • controls, and its compliance with our requirements for each criterion. Each Entering into, renewing, or directives and initiatives. contractor must certify that all terminating agreements or contracts A carrier must efficiently and information submitted to us relating to with contractors; • effectively manage its operations to the contract management process, Deciding other contract actions for assure constant improvement in the way including, without limitation, all files, intermediaries and carriers (such as it does business. Proper systems records, documents and data, whether deletion of an automatic renewal security (general and application in written, electronic, or other form, is clause). These decisions are made on a controls), ADP maintenance, and accurate and complete to the best of the case-by-case basis and depend primarily disaster recovery plans must be in place. contractor’s knowledge and belief. A on the nature and degree of Also, a carrier must test system changes contractor will also be required to performance. More specifically, they to ensure accurate implementation of certify that its files, records, documents, depend on the— • our instructions. and data have not been manipulated or Relative overall performance Our evaluation of a carrier under this falsified in an effort to receive a more compared to other contractors; criterion may include, but is not limited favorable performance evaluation. A • Number of criteria in which to, reviews of its— contractor must further certify that, to deficient performance occurs; • Systems security; the best of its knowledge and belief, the • Extent of each deficiency; • ADP maintenance (configuration contractor has submitted, without • Relative significance of the management, testing, change withholding any relevant information, requirement for which deficient management, security, etc.); all information required to be submitted performance occurs within the overall • Disaster recovery plan; with respect to the contract management evaluation program; and • Change management plan process under the authority of • Efforts to improve program quality, implementation; applicable law(s), regulation(s), service, and efficiency. • Data and reporting requirements contracts, or HCFA manual provision(s). • Deciding the assignment or implementation; and Any contractor that makes a false, reassignment of providers and
VerDate 112000 19:49 Oct 30, 2000 Jkt 194001 PO 00000 Frm 00048 Fmt 4703 Sfmt 4703 E:\FR\FM\31OCN1.SGM pfrm02 PsN: 31OCN1 64974 Federal Register / Vol. 65, No. 211 / Tuesday, October 31, 2000 / Notices designation of regional or national licensing in the U.S. in accordance with p53, and 14–3–3σ in neoplastic intermediaries for classes of providers. 35 U.S.C. 207 to achieve expeditious conditions, such as breast cancer or We make individual contract action commercialization of results of federally ovarian cancer. decisions after considering these factors funded research and development. The technology disclosed in the E– in terms of their relative significance ADDRESSES: Licensing information and a 307–00/0 patent application is directed and impact on the effective and efficient copy of the U.S. patent application to a method to identify an agent that administration of the Medicare program. referenced below may be obtained by modulates 14–3–3σ. The 14–3–3σ In addition, if the cost incurred by the contacting J. R. Dixon, Ph.D., at the intermediary or carrier to meet its checkpoint control gene is significantly Office of Technology Transfer, National downregulated in BRCA1 -/-cells. The contractual requirements exceeds the Institutes of Health, 6011 Executive amount that we find to be reasonable method includes incubating the agent Boulevard, Suite 325, Rockville, and a sample of interest, wherein the and adequate to meet the cost that must Maryland 20852–3804 (telephone 301/ be incurred by an efficiently and sample is capable of expressing 14–3– 496–7056 ext 206; fax 301/402–0220; e- σ economically operated intermediary or 3 , under conditions sufficient to allow mail [email protected]). A signed the compound of interest to interact carrier, these high costs may also be Confidential Disclosure Agreement is grounds for adverse action. with the sample, and determining the required to receive a copy of any patent effect of the compound on the VIII. Response to Public Comments application. σ σ expression or activity of 14–3–3 . The Because of the large number of items Entitled: ‘‘USE OF 14–3–3 AS A effect of an agent on the interaction of DIAGNOSTIC MARKER AND of correspondence we normally receive 14–3–3σ with p53 and/or BRCA1 can THERAPEUTIC TARGET’’—A Method on Federal Register documents also be assessed. A method is also to Diagnosis and Determine the published for comment, we are unable provided for determining the prognosis Prognosis of Breast and/or Ovarian to acknowledge or respond to them of a subject diagnosed with a 14–3–3σ- Cancers. individually. We will consider all associated disorder. The method comments we receive by the date and Inventors: Drs. Olga Aprelikova (NCI) and Edison T. Liu (NCI) DHHS Ref. No. includes contacting a sample from the time specified in the Dates section of subject with a reagent that binds to 14– this preamble, and, if we proceed with E–307–00/0, Filed with the USPTO on σ September 7, 2000. 3–3 , detecting binding of the reagent to a subsequent document, we will 14–3–3σ; and correlating the binding of respond to the comments in the Breast cancer is one of the most significant cancerous diseases that the reagent to the sample with the preamble of that document. prognosis of the disorder. The method In accordance with the provisions of affects women. At the current rate, American women have a 1 in 8 risk of can also include detecting p53 and/or Executive Order 12866, this notice was BRCA1 mutations. reviewed by the Office of Management developing breast cancer by age 95 and Budget. (American Cancer Society, 1992). The above mentioned invention is Treatment of breast cancer at later stages available for licensing on an exclusive IX. Federalism is often futile and disfiguring, making or non-exclusive basis. We have reviewed this notice under early detection a high priority in Dated: October 23, 2000. medical management of the disease. the threshold criteria of Executive Order Jack Spiegel, 13132, Federalism. We have determined Ovarian cancer, although less frequent that the notice does not significantly than breast cancer is often rapidly fatal Director, Division of Technology Development & Transfer, Office of Technology Transfer. affect the rights, roles, and and is the fourth most common cause of responsibilities of States. cancer mortality in American women. [FR Doc. 00–27890 Filed 10–30–00; 8:45 am] Genetic factors contribute to an ill- BILLING CODE 4140±01±P (Catalog of Federal Domestic Assistance Program No. 93.773, Medicare—Hospital defined proportion of breast cancer Insurance, and Program No. 93.774, incidence, estimated to be about 5% of Medicare—Supplementary Medical all cases but approximately 25% of DEPARTMENT OF HEALTH AND Insurance Program) cases diagnosed before age 40. Breast HUMAN SERVICES Dated: September 8, 2000. cancer has been subdivided into two National Institutes of Health Nancy-Ann Min DeParle, types, early-age onset and late-age onset, based on an inflection in the age- Administrator, Health Care, Financing Office of the Director, National Administration. specific incidence curve around age 50. Mutation of one gene, BRCA1, is Institutes of Health; Amended Notice [FR Doc. 00–27955 Filed 10–30–00; 8:45 am] of Meeting BILLING CODE 4120±01±P thought to account for approximately 45% of familial breast cancer, but at least 80% of families with both breast Notice is hereby given of a change in the meeting of the Director’s Council of DEPARTMENT OF HEALTH AND and ovarian cancer. Public Representatives, October 31– HUMAN SERVICES The 14–3–3σ checkpoint control gene is significantly downregulated in November 1, 2000, National Institutes of National Institutes of Health BRCA1 -/-cells. The cell cycle profile of Health, 9000 Rockville Pike, Building these cells treated with ionizing 31, Conference Room 6, Bethesda, MD Government-Owned Inventions; radiation showed an inability to sustain 20982 which was published in the Availability for Licensing G2/M growth arrest typical for 14–3–3σ Federal Register on October 10, 2000, σ 65 FR 60200–60201. AGENCY: National Institutes of Health, deprived cells. In addition, 14–3–3 has Public Health Service, DHHS. been identified as a p53 inducible gene The dates, times, and location of the ACTION: Notice. after DNA damage. Thus, BRCA1 meeting are the same but the agenda has synergistically activates p53 dependent changed to discuss human research SUMMARY: The invention listed below is transcription of 14–3–3σ gene. These protections and medical applications owned by an agency of the U.S. observations demonstrate the role of 14– research. The meeting is open to the Government and is available for 3–3σ, and the interaction of BRCA1, public.
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Dated: October 17, 2000. DEPARTMENT OF HEALTH AND is hereby given of the meeting of the LaVerne Y. Stringfield, HUMAN SERVICES Board of Scientific Counselors, National Director, Office of Federal Advisory Cancer Institute. Committee Policy. National Institutes of Health The meeting will be closed to the [FR Doc. 00–27887 Filed 10–30–00; 8:45 am] public as indicated below in accordance National Cancer Institute; Notice of with the provisions set forth in sections BILLING CODE 4140±01±M Closed Meeting 552b(c)(6) and 552b(c)(9)(B), Title 5 Pursuant to section 10(d) of the U.S.C. as amended. The discussions DEPARTMENT OF HEALTH AND Federal Advisory Committee Act, as could reveal information of a personal HUMAN SERVICES amended (5 U.S.C. Appendix 2), notice nature where disclosure would is hereby given of the following constitute a clearly unwarranted National Institutes of Health meeting. invasion of personal privacy and the The meeting will be closed to the premature disclosure of discussions National Cancer Institute; Notice of public in accordance with the related to personnel and programmatic Closed Meeting provisions set forth in sections issues would be likely to significantly 552b(c)(4) and 552b(c)(6), title 5 U.S.C., frustrate the subsequent implementation Pursuant to section 10(d) of the as amended. The grant applications and or recommendations. Federal Advisory Committee Act, as the discussions could disclose Name of Committee: Board of Scientific amended (5 U.S.C. Appendix 2), notice confidential trade secrets or commercial Counselors, National Cancer Institute, is hereby given of the following property such as patentable material, Subcommittee B—Basic Sciences. meeting. and personal information concerning Date: November 13, 2000. The meeting will be closed to the individuals associated with the grant Time: 8:30 am. 5:30 pm. applications, the disclosure of which Agenda: Discussion of personnel and public in accordance with the programmatic issues and review and evaluate provisions set forth in sections would constitute a clearly unwarranted individual Principal Investigators. 552b(c)(4) and 552b(c)(6), Title 5 U.S.C., invasion of personal privacy. Place: National Cancer Institute, Building as amended. The grant applications and Name of Committee: National Cancer 31, C Wing, 6th Floor, Conference Room 6, the discussions could disclose Institute Special Emphasis Panel, Molecular 9000 Rockville Pike, Bethesda, MD 20892. confidential trade secrets or commercial Target Drug Discovery For Cancer. Contact Person: Florence Farber, PhD, property such as patentable material, Date: November 29, 2000. Executive Secretary, Institute Review Office, and personal information concerning Time: 8 am to 5 pm Office of the Director, National Cancer Institute, National Institutes of Health, 6116 individuals associated with the grant Agenda: To review and evaluate grant applications. Executive Boulevard, Room 7017, Rockville, applications, the disclosure of which Place: Double Tree Hotel, 1750 Rockville MD 20852, (301) 496–7628. would constitute a clearly unwarranted Pike, Rockville, MD 20852. (Catalogue of Federal Domestic Assistance invasion of personal privacy. Contact Person: Lalita D. Palekar, PhD, Program Nos. 93–392, Cancer Construction; Name of Committee: National Cancer Scientific Review Administrator, Special 93.393. Cancer Cause and Prevention Institute Special Emphasis Panel, NCI Review, Referral and Resources Branch, Research; 93.394, Cancer Detection and Scholars Program: RFA CA–01–007. Division of Extramural Activities, National Diagnosis Research; 93.395 Cancer Treatment Cancer Institute, National Institutes of Date: November 14, 2000. Research; 93.396, Cancer Biology Research; Health, 6116 Executive Boulevard, Room 93.397, Cancer Centers Support; 93.398, Time: 6 pm to 8 pm. 8066, Bethesda, MD 20892–7405, (301) 496– Cancer Research Manpower; 93.399, Cancer Agenda: To review and evaluate grant 7575. Control, National Institutes of Health, HHS) applications. Place: The Georgetown Holiday Inn, 2101 (Catalogue of Federal Domestic Assistance Dated: October 18, 2000. Wisconsin Ave, NW, Washington, DC 20007. Program Nos. 93.392, Cancer Construction; LaVerne Y. Stringfield, 93.393, Cancer Cause and Prevention Contact Person: Mary Bell, PhD, Scientific Research’ 93.394, Cancer Detection and Director, Office of Federal Advisory Review Administrator, Grants Review Diagnosis Research; 93.395, Cancer Committee Policy. Branch, Division of Extramural Activities, Treatment Research; 93.396, Cancer Biology [FR Doc. 00–27881 Filed 10–30–00; 8:45 am] National Cancer Institute, National Institutes Research; 93.397, Cancer Centers Support; BILLING CODE 4140±01±M of Health, 6116 Executive Boulevard, Room 93.398, Cancer Research Manpower; 93.399, 8058, Bethesda, MD 20892, 301/496–7878. Cancer Control, National Institutes of Health, This notice is being published less than 15 HHS) DEPARTMENT OF HEALTH AND days prior to the timing limitations imposed Dated: October 19, 2000. HUMAN SERVICES by the review and funding cycle. LaVerne Y. Stringfield, (Catalogue of Federal Domestic Assistance Director, Office of Federal Advisory National Institutes of Health Program Nos. 93.392, Cancer Construction, Committee Policy. National Cancer Institute; Notice of 93.393, Cancer Cause and Prevention [FR Doc. 00–27880 Filed 10–30–00; 8:45 am] Research; 93.394, Cancer Detection and Closed Meeting BILLING CODE 4140±01±M Diagnosis Research; 93.395, Cancer Pursuant to section 10(d) of the Treatment Research; 93.396, Cancer Biology Federal Advisory Committee Act, as Research; 93.397, Cancer Centers Support; DEPARTMENT OF HEALTH AND amended (5 U.S.C. Appendix 2), notice 93.398, Cancer Research Manpower; 93.399, HUMAN SERVICES Cancer Control, National Institutes of Health, is hereby given of the following HHS) meeting. National Institutes of Health The meeting will be closed to the Dated: October 19, 2000. public in accordance with the LaVerne Y. Stringfield, National Cancer Institute; Notice of Closed Meeting provisions set forth in sections Director, Office of Federal Advisory 552b(c)(4) and 552b(c)(6), Title 5 U.S.C., Committee Policy. Pursuant to section 10(d) of the as amended. The grant applications and [FR Doc. 00–27879 Filed 10–30–00; 8:45 am] Federal Advisory Committee Act, as the discussions could disclose BILLING CODE 4140±01±M amended (5 U.S.C. Appendix 2), notice confidential trade secrets or commercial
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Agenda: To review and evaluate grant Review Branch, DEA, NIDDK, Room 659, Name of Committee: National Cancer applications. 6707 Democracy Boulevard, National Institute Special Emphasis Panel, The Place: 8120 Wisconsin Avenue, Bethesda, Institutes of Health, Bethesda, MD 20892– Regents of the University of Michigan. MD 20814. 6600 (301) 594–7799. Date: November 1–3, 2000. Contact Person: John C. Chah, PhD, (Catalogue of Federal Domestic Assistance Time: 7:30 pm to 12 pm. Scientific Review Administrator, National Institutes of Health, NCCAM, Building 31, Program Nos. 93.847, Diabetes, Agenda: To review and evaluate grant Endocrinology and Metabolic Research; applications. Room 5B50, 9000 Rockville Pike, Bethesda, MD 20892, 301–402–4334, [email protected]. 93.848, Digestive Diseases and Nutrition Place: Holiday Inn (North Campus), 3600 Research; 93.849, Kidney Diseases, Urology Plymouth Road, Ann Arbor, MI 48105. Dated: October 18, 2000, and Hematology Research, National Institutes Contact Person: Mary Bell, PhD, Scientific LaVerne Y. Stringfield, of Health, HHS) Review Administrator, Grants Review Director, Office of Federal Advisory Dated: October 19, 2000. Branch, Division of Extramural Activities, Committee Policy. National Cancer Institute, National Institutes LaVerne Y. Stringfield, of Health, 6116 Executive Boulevard, Room [FR Doc. 00–27882 Filed 10–30–00; 8:45 am] Director, Office of Federal Advisory 8058, Bethesda, MD 20892, 301/496–7878. BILLING CODE 4140±01±M Committee Policy. This notice is being published less than 15 [FR Doc. 00–27878 Filed 10–30–00; 8:45 am] days prior to the meeting due to the timing BILLING CODE 4140±01±M limitations imposed by the review and DEPARTMENT OF HEALTH AND funding cycle. HUMAN SERVICES (Catalogue of Federal Domestic Assistance DEPARTMENT OF HEALTH AND Program Nos. 93.392, Cancer Construction; National Institutes of Health HUMAN SERVICES 93.393, Cancer Cause and Prevention Research; 93.394, Cancer Detection and National Institute of Diabetes and National Institutes of Health Diagnosis Research; 93.395, Cancer Digestive and Kidney Diseases; Notice Treatment Research; 93.396, Cancer Biology of Closed Meetings National Institute of Allergy and Research; 93.397, Cancer Centers Support; Infectious Diseases; Notice of Closed Pursuant to section 10(d) of the 93.398, Cancer Research Manpower; 93.399, Meeting Cancer Control, National Institutes of Health, Federal Advisory Committee Act, as HHS) amended (5 U.S.C. Appendix 2), notice Pursuant to section 10(d) of the Dated: October 17, 2000. is hereby given of the following Federal Advisory Committee Act, as meetings. LaVerne Y. Stringfield, amended (5 U.S.C. Appendix 2), notice The meetings will be closed to the is hereby given of a meeting of the Director, Office of Federal Advisory public in accordance with the Committee Policy. Board of Scientific Counselors, NIAID. provisions set forth in sections The meeting will be closed to the [FR Doc. 00–27888 Filed 10–30–00; 8:45 am] 552b(c)(4) and 552b(c)(6), title 5 U.S.C., public as indicated below in accordance BILLING CODE 4140±01±M as amended. The grant applications and with the provisions set forth in section the discussions could disclose 552b(c)(6), Title 5 U.S.C., as amended confidential trade secrets or commercial for the review, discussion, and DEPARTMENT OF HEALTH AND property such as patentable material, evaluation of individual intramural HUMAN SERVICES and personal information concerning programs and projects conducted by the National Institutes of Health individuals associated with the grant National Institute of Allergy and applications, the disclosure of which Infectious Diseases, including National Center for Complementary & would constitute a clearly unwarranted consideration of personnel Alternative Medicine; Notice of Closed invasion of personal privacy. qualifications and performance, and the Meeting Name of Committee: National Institute of competence of individual investigators, Diabetes and Digestive and Kidney Diseases the disclosure of which would Pursuant to section 10(d) of the Special Emphasis Panel, ZDK1 GRB 4 J2. constitute a clearly unwarranted Federal Advisory Committee Act, as Date: November 17, 2000. invasion of personal privacy. amended (5 U.S.C. Appendix 2), notice Time: 3 pm to 4 pm. Name of Committee: Board of Scientific is hereby given of the following Agenda: To review and evaluate grant Counselors, NIAID. meeting. applications. Date: December 11–13, 2000. Place: 2 Democracy Plaza, 6707 Democracy Time: December 11, 2000, 8 am to The meeting will be closed to the Boulevard, 6th Floor, Room #647, Bethesda, adjournment on December 13. public in accordance with the MD 20892–5452 (Telephone Conference Agenda: To review and evaluate personal provisions set forth in sections Call). qualifications and performance, and 552b(c)(4) and 552b(c)(6), Title 5 U.S.C., Contact Person: William E. Elzinga, PhD, competence of individual investigators. as amended. The grant applications and Scientific Review Administrator, Review Place: National Institutes of Health, the discussions could disclose Branch, DEA, NIDDK, Room 647, 6707 Building 4, Conference Room 433, 10 Center Democracy Boulevard, National Institutes of confidential trade secrets or commercial Drive, Bethesda, MD 20892. Health, Bethesda, MD 20892–6600 (301) 594– Contact Person: Thomas J. Kindt, PhD, property such as patentable material, 8895. Director, Division of Intramural Research, and personal information concerning Name of Committee: National Institute of National Inst. of Allergy & Infectious individuals associated with the grant Diabetes and Digestive and Kidney Diseases Diseases, Building 10, Room 4A31, Bethesda, applications, the disclosure of which Special Emphasis Panel, ZDK1 GRB–7 J3. MD 20892, 301 496–3006, [email protected]. would constitute a clearly unwarranted Date: November 19–20, 2000. (Catalogue of Federal Domestic Assistance invasion of personal privacy. Time: 7:30 pm to 5 pm. Program Nos. 93.855, Allergy, Immunology,
VerDate 112000 19:49 Oct 30, 2000 Jkt 194001 PO 00000 Frm 00051 Fmt 4703 Sfmt 4703 E:\FR\FM\31OCN1.SGM pfrm02 PsN: 31OCN1 Federal Register / Vol. 65, No. 211 / Tuesday, October 31, 2000 / Notices 64977 and Transplantation Research; 93.856, DEPARTMENT OF HEALTH AND provisions set forth in sections Microbiology and Infectious Diseases HUMAN SERVICES 552b(c)(4) and 552(b)(c)(6), title 5 Research, National Institutes of Health, HHS) U.S.C., as amended. The grant Dated: October 18, 2000. National Institutes of Health applications and the discussions could LaVerne Y. Stringfield, disclose confidential trade secrets or National Institute of Allergy and commercial property such as patentable Director, Office of Federal Advisory Infectious Diseases; Notice of Closed material, and personal information Committee Policy. Meeting concerning individuals associated with [FR Doc. 00–27883 Filed 10–30–00; 8:45 am] Pursuant to section 10(d) of the the grant applications, the disclosure of BILLING CODE 4140±01±M Federal Advisory Committee Act, as which would constitute a clearly amended (5 U.S.C. Appendix 2), notice unwarranted invasion of personal is hereby given of the following privacy. DEPARTMENT OF HEALTH AND meeting. HUMAN SERVICES Name of Committee: Molecular, Cellular The meeting will be closed to the and Developmental Neuroscience Integrated public in accordance with the Review Group, Visual Sciences A Study National Institutes of Health provisions set forth in sections Section. Date: October 30–31, 2000. National Institute of Allergy and 552b(c)(4) and 552b(c)(6), Title 5 U.S.C., as amended. The contract proposals and Time: 8 p.m. to 6 p.m. Infectious Disease; Notice of Closed Agenda: To review and evaluate grant Meeting the discussions could disclose applications. confidential trade secrets or commercial Place: Radisson Barcelo Hotel, 2121 P St., Pursuant to section 10(d) of the property such as patentable material, NW, Washington, DC 20037. Federal Advisory Committee Act, as and personal information concerning Contact Person: Michael H. Chaitin, PhD, amended (5 U.S.C. Appendix 2), notice individuals associated with the contract Scientific Review Administrator, Center for proposals, the disclosure of which Scientific Review, National Institutes of is hereby given of the following Health, 6701 Rockledge Drive, Room 5202, meeting. would constitute a clearly unwarranted invasion of personal privacy. MSC 7850, Bethesda, MD 20892, (301) 435– The meeting will be closed to the 0910. Name of Committee: National Institute of public in accordance with the This notice is being published less than 15 Allergy and Infectious Diseases Special days prior to the meeting due to the timing provisions set forth in sections Emphasis Panel. limitations imposed by the review and 552b(c)(4) and 552b(c)(6), Title 5 U.S.C., Date: November 6–7, 2000. funding cycle. as amended. The grant applications and Time: 8:30 am to 2:00 pm. Name of Committee: Center for Scientific the discussions could disclose Agenda: To review and evaluate contract Review Special Emphasis Panel. confidential trade secrets or commercial proposals. Date: November 1–2, 2000. property such as patentable material, Place: Georgetown Holiday Inn, Fortune Time: 8 p.m. to 5 p.m. Room, 2101 Wisconsin Avenue, NW., and personal information concerning Agenda: To review and evaluate grant Washington, DC 20007. applications. individuals associated with the grant Contact Person: Dianne E. Tingley, PhD, applications, the disclosure of which Place: Holiday Inn, 5520 Wisconsin Scientific Review Administrator, Scientific Avenue, Chevy Chase, MD 20815. would constitute a clearly unwarranted Review Program, Division of Extramural Contact Person: Gopal C. Sharma, DVM, invasion of personal privacy. Activities, NIAID, NIH, Room 2220, 6700–B MS, PhD, Diplomate American Board of Rockledge Drive, MSC 7610, Bethesda, MD Toxicology, Scientific Review Administrator, Name of Committee: National Institute of 20892–7610, 301–496–2550. Allergy and Infectious Diseases Special Center for Scientific Review, National (Catalogue of Federal Domestic Assistance Institutes of Health, 6701 Rockledge Drive, Emphasis Panel. Program Nos. 93.855, Allergy, Immunology, Room 2184, MSC 7818, Bethesda, MD 20892, Date: November 14–15, 2000. and Transplantation Research; 93.856, (301) 435–1783, [email protected]. Time: 8 a.m. to 5 p.m. Microbiology and Infectious Diseases This notice is being published less than 15 Agenda: To review and evaluate grant Research, National Institutes of Health, HHS) days prior to the meeting due to the timing applications. limitations imposed by the review and Place: Swissotel Washington, The Dated: October 18, 2000. funding cycle. Watergate, 2650 Virginia Ave., NW., LaVerne Y. Stringfield, Name of Committee: Center for Scientific Washington, DC 20037. Director, Office of Federal Advisory Review Special Emphasis Panel. Contact Person: Gerald L McLaughlin, Committee Policy. Date: November 1, 2000. PhD, Scientific Review Administrator, [FR Doc. 00–27885 Filed 10–30–00; 8:45 am] Time: 10:30 a.m. to 11:30 a.m. Agenda: To review and evaluate grant Scientific Review Program, Division of BILLING CODE 4140±01±M Extramural Activities, NIAID, NIH, Room applications. Place: NIH, Rockledge 2, Bethesda, MD 2217, 6700–B Rockledge Drive, MSC 7610, 20892 (Telephone Conference Call). Bethesda, MD 20892–7610, 301–496–2550, DEPARTMENT OF HEALTH AND Contact Person: Michael Oxman, PhD, [email protected]. HUMAN SERVICES Scientific Review Administrator, Center for (Catalogue of Federal Domestic Assistance Scientific Review, National Institutes of Program Nos. 93.855, Allergy Immunology, National Institutes of Health Health, 6701 Rockledge Drive, Room 4112, MSC 7848, Bethesda, MD 20892, 301/435– and Transplantation Research; 93.856, Center for Scientific Review; Notice of Microbiology and Infectious Diseases 3565, [email protected]. Closed Meetings This notice is being published less than 15 Research, National Institutes of Health, HHS) days prior to the meeting due to the timing Dated: October 18, 2000. Pursuant to section 10(d) of the limitations imposed by the review and Federal Advisory Committee Act, as funding cycle. LaVerne Y. Stringfield, amended (5 U.S.C. Appendix 2), notice Director, Office of Federal Advisory Name of Committee: Cardiovascular is hereby given of the following Sciences Integrated Review Group, Committee Policy. meetings. Cardiovascular Study Sectin. [FR Doc. 00–27884 Filed 10–30–00; 8:45 am] The meetings will be closed to the Date: November 2–3, 2000. BILLING CODE 4140±01±M public in accordance with the Time: 8 am to 5 pm.
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Agenda: To review and evaluate grant Place: Hyatt Regency Hotel, One Bethesda Place: Holiday Inn Bethesda, 8120 applications. Metro Center, Bethesda, MD 20814. Wisconsin Avenue, Bethesda, MD 20814. Place: Holiday Inn Chevy Chase, 5520 Contact Person: Sami A. Mayyasi, PhD, Contact Person: Karen Sirocco, PhD, Wisconsin Avenue, Chevy Chase, MD 20815. Scientific Review Administrator, Center for Scientific Review Administrator, Center for Contact Person: Gordon L. Johnson, PhD, Scientific Review, National Institutes of Scientific Review, National Institutes of Scientific Review Administrator, Center for Health, 6701 Rockledge Drive, Room 5112, Health, 6701 Rockledge Drive, Room 3184, Scientific Review, National Institutes of MSC 7852, Bethesda, MD 20892, (301) 435– MSC 7848, Bethesda, MD 20892, (301) 435– Health, 6701 Rockledge Drive, Room 4136, 1169. 0676. MSC 7802, Bethesda, MD 20892, (301) 435– This notice is being published less than 15 This notice is being published less than 15 1212, [email protected]. days prior to the meeting due to the timing days prior to the meeting due to the timing This notice is being published less than 15 limitations imposed by the review and limitations imposed by the review and days prior to the meeting due to the timing funding cycle. funding cycle. limitations imposed by the review and Name of Committee: Center for Scientific Name of Committee: Center for Scientific funding cycle. Reveiw Special Emphasis Panel. Review Special Emphasis Panel. Name of Committee: Center for Scientific Date: November 2–3, 2000. Date: November 2–3, 2000. Review Special Emphasis Panel. Time: 8 am to 5 pm. Time: 8:30 am to 5 pm. Date: November 2, 2000. Agenda: To review and evaluate grant Agenda: To review and evaluate grant Time: 8 am to 6 pm. applications. applications. Agenda: To review and evaluate grant Place: Le Pavillon Hotel, 833 Poydras Place: Holiday Inn Select (New Orleans applications. Street, New Orleans, LA 70112. Airport), 2929 Williams Blvd., Kenner, LA Place: River Inn, 924 25th Street, NW., Contact Person: Michael Nunn, PhD, 70062. Washington, DC 20037. Scientific Review Administrator, Center for Contact Person: Mary Custer, PhD, Contact Person: Stephen M. Nigida, PhD, Scientific Review, National Institutes of Scientific Review Administrator, Center for Scientific Review Administrator, Center for Health, 6701 Rockledge Drive, Room 5202, Scientific Review, National Institutes of Scientific Review, National Institutes of MSC 7850, Bethesda, MD 20892, (301) 435– Health, 6701 Rockledge Drive, Room 5102, Health, 6701 Rockledge Drive, Room 4112, 0910. MSC 7850, Bethesda, MD 20892, (301) 435– MSC 7812, Bethesda, MD 20892, (301) 435– 1164. This notice is being published less than 15 3565. This notice is being published less than 15 days prior to the meeting due to the timing This notice is being published less than 15 days prior to the meeting due to the timing limitations imposed by the review and days prior to the meeting due to the timing limitations imposed by the review and funding cycle. limitations imposed by the review and funding cycle. Name of Committee: Genetic Sciences funding cycle. Name of Committee: Center for Scientific Integrated Review Group, Genome Study Name of Committee: Cell Development and Review Special Emphasis Panel. Section. Function Integrated Review Group, Cell Date: November 2–3, 2000. Date: November 2–3, 2000. Development and Function 6. Time: 9 am to 5 pm. Time: 8:30 am to 1:30 pm. Date: November 2–3, 2000. Agenda: To review and evaluate grant Time: 8 am to 5 pm. Agenda: To review and evaluate grant applications. Agenda: To review and evaluate grant applications. Place: Embassy Suites Chevy Chase applications and/or proposals. Place: Holiday Inn Georgetown, 2101 Pavillion, 4300 Military Road, NW, Place: Chevy Chase Holiday Inn, 5520 Wisconsin Avenue, NW., Washington, DC Washington, DC 20015. Wisconsin Ave., Chevy Chase, MD 20815. 20007. Contact Person: Anita Miller Sostek, PhD, Contact Person: Richard D. Rodewald, Contact Person: Cheryl M. Corsaro, PhD, Scientific Review Administrator, Center for PhD, Scientific Review Administrator, Center Scientific Review Administrator, Center for Scientific Review, National Institutes of for Scientific Review, National Institutes of Scientific Review, National Institutes of Health, 6701 Rockledge Drive, Room 3176, Health, 6701 Rockledge Drive, Room 5142, Health, 6701 Rockledge Drive, Room 2204, MSC 7848, Bethesda, MD 20892, (301) 435– MSC 7840, Bethesda, MD 20892, (301) 435– MSC 7890, Bethesda, MD 20892, 301–435– 1260. 1024. 1045 [email protected]. This notice is being published less than 15 This notice is being published less than 15 This notice is being published less than 15 days prior to the meeting due to the timing days prior to the meeting due to the timing days prior to the meeting due to the timing limitations imposed by the review and limitations imposed by the review and limitations imposed by the review and funding cycle. funding cycle. funding cycle. Name of Committee: Center for Scientific Name of Committee: Center for Scientific Name of Committee: AIDS and Related Review Special Emphasis Panel. Review Special Emphasis Panel. Research Integrated Review Group, AIDS and Date: November 2, 2000. Date: November 2–3, 2000. Related Research 3. Time: 1:30 pm to 2:30 pm. Time: 8 am to 5 pm. Date: November 2, 2000. Agenda: To review and evaluate grant Agenda: To review and evaluate grant Time: 8:30 am to 6 pm. applications. applications. Agenda: To review and evaluate grant Place: Holiday Inn Chevy Chase, 5520 Place: Holiday Inn, 8120 Wisconsin applications. Wisconsin Avenue, Chevy Chase, MD 20815. Avenue, Bethesda, MD 20814. Place: Holiday Inn Chevy Chase, 5520 Contact Person: Gerhard Ehrenspeck, PhD, Contact Person: Tracy E. Orr, PhD, Wisconsin Avenue, Chevy Chase, Md 20815. Scientific Review Administrator, Center for Scientific Review Administrator, Center for Contact Person: Randall J. Owens, PhD, Scientific Review, National Institutes of Scientific Review, National Institutes of Scientific Review Administrator, Center for Health, 6701 Rockledge Drive, Room 5138, Health, 6701 Rockledge Drive, Room 5118, Scientific Review, National Institutes of MSC 7840, Bethesda, MD 20892, (301) 435– MSC 7812, Bethesda, MD 20892, (301) 435– Health, 6701 Rockledge Drive, Room 5102, 1022, [email protected]. 1259. MSC 7852, Bethesda, MD 20892, 301–435– This notice is being published less than 15 This notice is being published less than 15 1506. days prior to the meeting due to the timing days prior to the meeting due to the timing This notice is being published less than 15 limitations imposed by the review and limitations imposed by the review and days prior to the meeting due to the timing funding cycle. funding cycle. limitations imposed by the review and Name of Committee: Center for Scientific Name of Committee: AIDS and Related funding cycle. Review Special Emphasis Panel. Research Integrated Review Group, AIDS and Name of Committee: Center for Scientific Date: November 3, 2000. Related Research 2. Reveiw Special Emphasis Panel. Time: 8:30 a.m. to 1 p.m. Date: November 2–3, 2000. Date: November 2–3, 2000. Agenda: To review and evaluate grant Time: 8 am to 1:30 pm. Time: 8:30 am to 5 pm. applications. Agenda: To review and evaluate grant Agenda: To review and evaluate grant Place: Holiday Inn Chevy Chase, 5520 applications. applications. Wisconsin Avenue, Chevy Chase, MD 20815.
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Contact Person: Randall J. Owens, PhD, Contact Person: Eugene Vigil, PhD, Scientific Review, National Institutes of Scientific Review Administrator, Center for Scientific Review Administrator, Center for Health, 6701 Rockledge Drive, Room 3180, Scientific Review, National Institutes of Scientific Review, National Institutes of MSC 7848, Bethesda, MD 20892, 301–435– Health, 6701 Rockledge Drive, Room 5102, Health, 6701 Rockledge Drive, Room 5144, 0902. MSC 7852, Bethesda, MD 20892, 301–435– MSC 7840, Bethesda, MD 20892, (301) 435– This notice is being published less than 15 1506. 1025. days prior to the meeting due to the timing This notice is being published less than 15 This notice is being published less than 15 limitations imposed by the review and days prior to the meeting due to the timing days prior to the meeting due to the timing funding cycle. limitations imposed by the review and limitations imposed by the review and Name of Committee: Center for Scientific funding cycle. funding cycle. Review Special Emphasis Panel. Name of Committee: Center for Scientific Name of Committee: Center for Scientific Date: November 6, 2000. Review Special Emphasis Panel. Review Special Emphasis Panel. Time: 2 pm to 4 pm. Date: November 3, 2000. Date: November 6, 2000. Agenda: To review and evaluate grant Time: 1:45 p.m. to 3:30 p.m. Time: 8 am to 4 pm. applications. Agenda: To review and evaluate grant Agenda: To review and evaluate grant Place: NIH, Rockledge 2, Bethesda, MD applications. applications. 20892, (Telephone Conference Call). Place: Holiday Inn Georgetown, 2101 Place: Radisson Barcelo Hotel, 2121 P St., Contact Person: Leonard Jakubczak, PhD, Wisconsin Avenue, N.W., Washington, DC NW., Washington, DC 20037. Scientific Review Administrator, Center for 20007. Contact Person: Lee Rosen, PhD, Scientific Scientific Review, National Institutes of Contact Person: Cheryl M. Corsaro, PhD, Review Administrator, Center for Scientific Health, 6701 Rockledge Drive, Room 5172, Scientific Review Administrator, Center for Review, National Institutes of Health, 6701 MSC 7844, Bethesda, MD 20892, 301–435– Scientific Review, National Institutes of Rockledge Drive, Room 5116, MSC 7854, 1247. Health, 6701 Rockledge Drive, Room 2204, Bethesda, MD 20892, (301) 435–1171. This notice is being published less than 15 MSC 7890, Bethesda, MD 20892, 301–435– This notice is being published less than 15 days prior to the meeting due to the timing 1045, [email protected] days prior to the meeting due to the timing limitations imposed by the review and This notice is being published less than 15 limitations imposed by the review and funding cycle. days prior to the meeting due to the timing funding cycle. Name of Committee: Center for Scientific limitations imposed by the review and Name of Committee: Center for Scientific Review Special Emphasis Panel. funding cycle. Review Special Emphasis Panel HEM–1 Date: November 7, 2000. Name of Committee: Center for Scientific (10B). Time: 1 pm to 3 pm. Review Special Emphasis Panel. Date: November 6, 2000. Agenda: To review and evaluate grant Date: November 3, 2000. Time: 8 am to 4 pm. applications. Time: 3:45 p.m. to 4:30 p.m. Agenda: To review and evaluate grant Place: NIH, Rockledge 2, Bethesda, MD Agenda: To review and evaluate grant applications. 20892, (Telephone Conference Call). applications. Place: Chevy Chase Holiday Inn, 5520 Contact Person: Eugene M. Zimmerman, Place: Holiday Inn Georgetown, 2101 Wisconsin Ave., Chevy Chase, MD 20815. PhD, Scientific Review Administrator, Center Wisconsin Avenue, N.W., Washington, DC Contact Person: Robert T. Su, PhD, for Scientific Review, National Institutes of 20007. Scientific Review Administrator, Center for Health, 6701 Rockledge Drive, Room 4202, Contact Person: Cheryl M. Corsaro, PhD, Scientific Review, National Institutes of MSC 7812, Bethesda, MD 20892, 301–435– Scientific Review Administrator, Center for Health, 6701 Rockledge Drive, Room 4134, 1220, [email protected]. Scientific Review, National Institutes of MSC 7840, Bethesda, MD 20892, (301) 435– This notice is being published less than 15 Health, 6701 Rockledge Drive, Room 2204, 1195. days prior to the meeting due to the timing MSC 7890, Bethesda, MD 20892, 301–435– This notice is being published less than 15 limitations imposed by the review and 1045, [email protected] days prior to the meeting due to the timing funding cycle. This notice is being published less than 15 limitations imposed by the review and (Catalogue of Federal Domestic Assistance days prior to the meeting due to the timing funding cycle. Program Nos. 93.306, Comparative Medicine, limitations imposed by the review and Name of Committee: Center for Scientific 93.306; 93.333, Clinical Research, 93.333, funding cycle. Review Special Emphasis Panel. 93.337, 93.393–93.396, 93.837–93.844, Name of Committee: Center for Scientific Date: November 6–8, 2000. 93.846–93.878, 93.892, 93.893, National Review Special Emphasis Panel. Time: 8:30 am to 5:30 pm. Institutes of Health, HHS) Date: November 3, 2000. Agenda: To review and evaluate grant Dated: October 19, 2000. Time: 12:30 p.m. to 2 p.m. applications. Agenda: To review and evaluate grant Place: Georgetown Holiday Inn, LaVerne Y. Stringfield, applications. Kaleidoscope Room, 2101 Wisconsin Ave., Director, Office of Federal Advisory Policy. Place: NIH, Rockledge 2, Bethesda, MD NW., Washington, DC 20007. [FR Doc. 00–27877 Filed 10–30–00; 8:45 am] 20892 (Telephone Conference Call). Contact Person: Jerry L. Klein, PhD, BILLING CODE 4140±01±M Contact Person: Camilla E. Day, PhD, Scientific Review Administrator, Center for Scientific Review Administrator, Center for Scientific Review, National Institutes of Scientific Review, National Institutes of Health, 6701 Rockledge Drive, Room 4138, Health, 6701 Rockledge Drive, Room 2208, MSC 7804, Bethesda, MD 20892, (301) 435– DEPARTMENT OF HEALTH AND MSC 7890, Bethesda, MD 20892, (301) 435– 1213. HUMAN SERVICES 1037, [email protected] This notice is being published less than 15 This notice is being published less than 15 days prior to the meeting due to the timing National Institutes of Health days prior to the meeting due to the timing limitations imposed by the review and limitations imposed by the review and funding cycle. Center for Scientific Review; Notice of funding cycle. Name of Committee: Center for Scientific Closed Meeting Name of Committee: Center for Scientific Review Special Emphasis Panel. Pursuant to section 10(d) of the Review Special Emphasis Panel. Date: November 6, 2000. Federal Advisory Committee Act, as Date: November 3, 2000. Time: 9 am to 10:30 am. amended (5 U.S.C. Appendix 2), notice Time: 5 pm to 1 pm. Agenda: To review and evaluate grant Agenda: To review and evaluate grant applications. is hereby given of the following applications. Place: NIH, Rockledge 2, Bethesda, MD meeting. Place: Best Western University Tower, 20892, (Telephone Conference Call). The meeting will be closed to the 4507 Brooklyn Avenue, NE., Seattle, WA Contact Person: Mariana Dimitrov, PhD, public in accordance with the 98105. Scientific Review Administrator, Center for provisions set forth in sections
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552b(c)(4) and 552b(c)(6), Title 5 U.S.C., Dated: October 23, 2000. collection of information; (3) Enhance as amended. The grant applications and Jack Spiegel, the quality, utility, and clarity of the the discussions could disclose Director, Division of Technology Development information to be collected; and (4) confidential trade secrets or commercial and Transfer, Office of Technology Transfer. Minimize the burden of the collection of property such as patentable material, [FR Doc. 00–27889 Filed 10–30–00; 8:45 am] information on those who are to and personal information concerning BILLING CODE 4140±01±M respond; including through the use of individuals associated with the grant appropriate automated collection applications, the disclosure of which techniques or other forms of information would constitute a clearly unwarranted DEPARTMENT OF HOUSING AND technology, e.g., permitting electronic invasion of personal privacy. URBAN DEVELOPMENT submission of responses. This Notice also lists the following Name of Committee: Infectious Diseases [Docket No. FR±4562 N±08] and Microbiology Integrated Review Group, information: Title of Proposal: Updating the Low Tropical Medicine and Parasitology Study Notice of Proposed Information Section. Income Housing Tax Credit Database. Collection for Public Comment: Description of the need for the Date: October 19–20, 2000. Updating the Low-Income Housing Tax information and proposed use: Time: 8:30 am to 5:00 pm. Credit Database Section 42 of the I.R.C. provides for Agenda: To review and evaluate grant Low-Income Housing Tax Credits applications. AGENCY: Office of the Assistant Place: Holiday Inn Bethesda, Versailles IV (LIHTC) that encourage the production Secretary for Policy Development and of qualified low-income housing units. Room, 8120 Wisconsin Avenue, Bethesda, Research, HUD. MD 20814. Due to the decentralized nature of the ACTION: Notice. Contact Person: Jean Hickman, PhD, LIHTC program, there are few data available on the units that are currently Scientific Review Administrator, Center for SUMMARY: The proposed information being developed with this federal tax Scientific Review, National Institutes of collection requirement described below subsidy. The Department of Housing Health, 6701 Rockledge Drive, Room 4194, will be submitted to the Office of and Urban Development, while not MSC 7808, Bethesda, MD 20892, (301) 435– Management and Budget (OMB) for responsible for administering tax 1146. review, as required by the Paperwork credits, has special responsibilities in This notice is being published less than 15 Reduction Act. The Department is understanding and evaluating credit days prior to the meeting due to the timing soliciting public comments on the limitations imposed by the review and usage, both because the LIHTC helps subject proposal. funding cycle. provide for the housing needs of low- DATES: Comments Due Date: January 2, income persons and because credits (Catalogue of Federal Domestic Assistance 2001. Program Nos. 93.306, Comparative Medicine, work in conjunction with HUD 93.306; 93.333, Clinical Research, 93.333, ADDRESSES: Interested persons are subsidies in some units. 93.337, 93.393–93.396, 93.837–93.844, invited to submit comments regarding Absent this data collection, HUD will 93.846–93.878, 93.892, 93.893, National this proposal. Comments should refer to not have at its disposal the most current, Institutes of Health, HHS) the proposal by name and should be comprehensive LIHTC data, rendering sent to: Reports Liaison Officer, Office HUD unable to determine the types of Dated: October 18, 2000. of Policy Development and Research, areas in which the units are located, the LaVerne Y. Stringfield, Department of Housing and Urban concentration of such units Director, Office of Federal Advisory Development, 451 Seventh Street, SW., geographically and with respect to other Committee Policy. Room 8226, Washington, DC 20410. subsidized housing types, or whether [FR Doc. 00–27886 Filed 10–30–00; 8:45 am] FOR FURTHER INFORMATION CONTACT: incentives to develop LIHTC units in a BILLING CODE 4140±01±M Steven R. Ehrlich, Department of set of HUD designed Difficult Housing and Urban Development, 451 Development Areas has been effective. 7th Street, SW., Washington, DC 20410; In addition, without these data, both DEPARTMENT OF HEALTH AND telephone (202) 708–0426 (this is not a HUD and private researchers will be HUMAN SERVICES toll-free number). Copies of the unable to conduct sample-based studies proposed data collection instruments on the LIHTC due to the difficulty of National Institutes of Health and other available documents may be constructing a valid sample without a obtained from Mr. Ehrlich. complete data set on the universe of Prospective Grant of Exclusive LIHTC projects. License: Insulin Producing Cells SUPPLEMENTARY INFORMATION: The Members of affected public: Differentiated From Non-Insulin Department will submit the proposed Information will be solicited from the 57 Producing Cells by GLP±1 and information collection to OMB for agencies (predominantly state-level) that Exendin-4 and Use Thereof; Correction review, as required by the Paperwork allocate credits under section 42 of the Reduction Act of 1995 (44 U.S.C. I.R.C. The notice published in the October Chapter 35, as amended). Estimation of the total numbers of 17, 2000 Federal Register (65 FR This Notice is soliciting comments hours needed to prepare the information 61352)—announcing the prospective from members of the public and affected collection including number of grant of an exclusive license for use of agencies concerning the proposed respondents, frequency of response, and insulin producing cells differentiated collection of information to: (1) Evaluate hours of response: from non-insulin producing cells— whether the proposed collection of Number of respondents: 58. incorrectly listed the PCT Patent information is necessary for the proper Number of responses per respondent: Application Serial Number as ‘‘PCT/ performance of the functions of the 01. US99/180899’’ and the PHS Ref. as ‘‘E– agency, including whether the Total number of responses per 151–97/1’’. NIH is publishing this notice information will have practical utility; annum: 54. to correct the PCT application number (2) Evaluate the accuracy of the agency’s Hours per response: 24. to read ‘‘E–251–97/1’’. estimate of the burden of the proposed Total Hours: 1,392.
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Status of the proposed information DATES: Comments Due Date: November information and its proposed use; (5) collection: Pending OMB approval. 30, 2000. the agency form number, if applicable; Authority: Section 3506 of the Paperwork ADDRESSES: Interested persons are (6) what members of the public will be Reduction Act of 1995, 44 U.S.C. Chapter 35, invited to submit comments regarding affected by the proposal; (7) how as amended. this proposal. Comments should refer to frequently information submissions will Dated: October 23, 2000. the proposal by name and/or OMB be required; (8) an estimate of the total number of hours needed to prepare the Lawrence L. Thompson, approval number (2535–0102) and should be sent to: Joseph F. Lackey, Jr., information submission including General Deputy Assistant Secretary for Policy number of respondents, frequency of Development and Research. OMB Desk Officer, Office of Management and Budget, Room 10235, response, and hours of response; (9) [FR Doc. 00–27846 Filed 10–30–00; 8:45 am] New Executive Office Building, whether the proposal is new, an BILLING CODE 4210±62±M Washington, DC 20503. extension, reinstatement, or revision of FOR FURTHER INFORMATION CONTACT: an information collection requirement; and (10) the name and telephone DEPARTMENT OF HOUSING AND Wayne Eddins, Reports Management number of an agency official familiar URBAN DEVELOPMENT Officer, Q, Department of Housing and Urban Development, 451 Seventh Street, with the proposal and of the OMB Desk [Docket No. FR±4561±N±71] Southwest, Washington, DC 20410; e- Officer for the Department. This Notice mail [email protected]; also lists the following information: Notice of Submission of Proposed telephone (202) 708–2374. This is not a Title of Proposal: Request voucher for Information Collection to OMB; toll-free number. Copies of the proposed Grant Payment & LOCCS Voice Request Voucher for Grant Payment & forms and other available documents Response System Access Authorization. LOCCS Voice Response System submitted to OMB may be obtained OMB Approval Number: 2535–0102. Access Authorization from Mr. Eddins. Form Numbers: HUD–27053; HUD– AGENCY: Office of the Chief Information SUPPLEMENTARY INFORMATION: The 27054. Officer, HUD. Department has submitted the proposal Description of the Need for the ACTION: Notice. for the collection of information, as Information and its Proposed Use: described below, to OMB for review, as Request vouchers are used to prepare SUMMARY: The proposed information required by the Paperwork Reduction automated phone request for collection requirement described below Act (44 U.S.C. Chapter 35). The Notice distribution of grant funds using the has been submitted to the Office of lists the following information: (1) The automated Voice Response System Management and Budget (OMB) for title of the information collection (VRS). Authorization form is submitted review, as required by the Paperwork proposal; (2) the office of the agency to to establish access to voice activated Reduction Act. The Department is collect the information; (3) the OMB payment system. soliciting public comments on the approval number, if applicable; (4) the Frequency of Submission: on subject proposal. description of the need for the occasion.
Number of × Frequency of × Hours per respondents response response = Burden hours
Reporting Burden ...... 2,000 .... 20.5 .... 0.17 .... 41,133
Total Estimated Burden Hours: ACTION: Notice of Delegation of 1(c)(1)(J), through the initiation of civil 41,133. Authority. money penalty actions pursuant to 24 Status: Reinstatement, without CFR 30.45. change. SUMMARY: The Secretary of HUD has EFFECTIVE DATE: September 20, 2000. established an Enforcement Center to Authority: Section 3507 of the Paperwork consolidate HUD’s enforcement actions. FOR FURTHER INFORMATION CONTACT: Reduction Act of 1995, 44 U.S.C. 35, as In addition, pursuant to the regulations Dane M. Narode, Deputy Chief Counsel, amended. at 24 CFR Part 30, the Assistant Administrative Proceedings Branch, Dated: October 24, 2000. Secretary for Housing-Federal Housing Department Enforcement Center, Wayne Eddins, Commissioner has the authority to Department of Housing and Urban Departmental Reports Management Officer, initiate and resolve civil money penalty Development, Portals Building, 1250 Office of the Chief Information Officer. actions against multifamily mortgagors Maryland Avenue, Suite 200, [FR Doc. 00–27845 Filed 10–30–00; 8:45 am] and may delegate this authority to a Washington, DC 20024, (202) 708–3856. This is not a toll free number. For the BILLING CODE 4210±01±M designee. The National Housing Act at 12 U.S.C. 1735f–15(c)(1)(B)(x), provides hearing/speech-impaired, the number that among the violations subject to civil may be accessed via TTY by calling the DEPARTMENT OF HOUSING AND money penalty sanction is the failure by Federal Information Relay Service at 1– URBAN DEVELOPMENT an FHA mortgagor to timely file annual 800–877–8399. audited financial reports. A similar SUPPLEMENTARY INFORMATION: HUD [Docket No. FR±4572±D±10] provision is made with regard to Section regulations, at 24 CFR 30.45, permit the 202 mortgagors pursuant to 12 U.S.C. Assistant Secretary of Housing—Federal Delegation of Authority to the Director 1701q–1(c)(1)(J). This delegation of Housing Commissioner to initiate and of the Enforcement Center authority permits the Director of the resolve civil money penalty actions Enforcement Center to take enforcement against participants in HUD multifamily AGENCY: Office of the Assistant action for violations of 12 U.S.C. 1735f– insured housing programs. These Secretary for Housing, HUD. 15(c)(1)(B)(x) and 12 U.S.C. 1701q– participants include: a mortgagor of any
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The participating co-trustees the referenced violations is the River and Green Bay Natural Resource may revise the Restoration and mortgagor’s failure to timely file audited Damage Assessment’’ is available for Compensation Determination Plan in financial reports. See 12 U.S.C. 1735f– public review and comment. The public response to issues raised during the 15(c)(1)(B)(x) and 12 U.S.C. 1701q– comment period started at a public comment period. All written comments 1(c)(1)(J). Mortgagors are required to file meeting in Green Bay, Wisconsin on will be considered and included in the annual financial reports within 60 days October 25, 2000. In addition, Report of Assessment at the conclusion of the end of the mortgagor’s fiscal year. comments are being accepted on each of of the assessment process and the These reports must be examined and the following documents, released participating co-trustees will make the certified by an independent or certified previously. ‘‘Fish Consumption final determination for the assessment. Advisories in the Lower Fox River/ public accountant, and certified by an DATES: Written comments on the Green Bay Assessment Area’’ officer of the mortgagor. restoration and compensation (November 24, 1998); ‘‘Injuries to Avian Section 30.45 also provides that the determination plan and the published Resources, Lower Fox River/Green Bay Assistant Secretary may delegate his assessment results listed in this notice Natural Resource Damage Assessment’’ authority under the regulations to a must be submitted on or before (May 7, 1999); ‘‘PCB Pathway designee. This document would make December 15, 2000. that delegation to the Director of the Determination for the Lower Fox River/ Green Bay Natural Resource Damage ADDRESSES: The restoration and Enforcement Center. This delegation compensation determination plan, as does not affect the authority of the Assessment’’ (August 30, 1999); ‘‘Recreational Fishing Damages from well as the other documents listed in Mortgagee Review Board to initiate civil this notice, can be accessed online money penalties, as described in 24 CFR Fish Consumption Advisories in the Waters of Green Bay’’ (November 1, through the Internet at the following 30.35, or the authority of the Assistant website: http://midwest.fws.gov/nrda/. Secretary to initiate civil money 1999); ‘‘Injuries to Surface Water Resources, Lower Fox River/Green Bay Written requests for paper copies, or penalties for violations identified in 12 copies on compact disk, may be made U.S.C. 1735f–15(c)(1)(B)(x) and 12 Natural Resource Damage Assessment’’ (November 8, 1999); and ’’Injuries to to: David Allen, U.S. Fish and Wildlife U.S.C. 1701q–1(c)(1)(J). Service, 1015 Challenger Court, Green Wherefore, the Assistant Secretary for Fishery Resources, Lower Fox River/ Bay, Wisconsin 54311. Housing—Federal Housing Green Bay Natural Resource Damage Commissioner delegates authority, as Assessment’’ (November 8, 1999). SUPPLEMENTARY INFORMATION: The follows: The U.S. Department of the Interior purpose of this natural resource damage Section A. Authority Delegate: The (‘‘Department’’), the U.S. National assessment is to confirm and quantify Director of the HUD Enforcement Oceanic and Atmospheric injuries to natural resources, resultant Center, as designee, is authorized to take Administration, the Menominee Indian economic damages, and the natural all actions permitted under 24 CFR Part Tribe of Wisconsin, the Oneida Tribe of resource restoration necessary to 30, as they pertain to violations Indians of Wisconsin, the Little Traverse address those injuries in the Lower Fox identified in 12 U.S.C. 1735f– Bay Bands of Odawa Indians, and the River, Green Bay, and Lake Michigan 15(c)(1)(B)(x) and 12 U.S.C. 1701q– Michigan Attorney-General are acting as environment resulting from exposure to 1(c)(1)(J). co-trustees for natural resources polychlorinated biphenyls released by Section B. Authority to Redelegate: considered in this assessment, pursuant Fox River, Wisconsin paper mills. The The Director of the Enforcement Center to subpart G of the National Oil and injury and required restoration are is not authorized to redelegate, to Hazardous Substances Pollution assessed under the Comprehensive another designee, the authority Contingency Plan, 40 CFR 300.600 and Environmental Response, delegated under Section A. 300.610, and Executive Order 12580. Compensation, and Liability Act, as amended, and the Clean Water Act, as Authority: Section 30.45 of Title 24 of the The assessment, including the Code of Federal Regulations. activities addressed in this restoration amended. and compensation determination plan, Dated: September 20, 2000. William F. Hartwig, is being conducted pursuant to the Regional Director. William C. Apgar, Natural Resource Damage Assessment [FR Doc. 00–27944 Filed 10–30–00; 8:45 am] Assistant Secretary for Housing-Federal Regulations found at 43 CFR Part 11. Housing Commissioner. The public review of the restoration and BILLING CODE 4310±55±M [FR Doc. 00–27844 Filed 10–30–00; 8:45 am] compensation determination plan BILLING CODE 4210±27±M announced by this Notice is provided DEPARTMENT OF THE INTERIOR for in 43 CFR 11.81(d)(1). Interested members of the public are Bureau of Land Management DEPARTMENT OF THE INTERIOR invited to review and comment on the restoration and compensation [UT±930±01±1320±01] Fish and Wildlife Service determination plan, and on the Notice of Public Hearing and Call for Notice of Availability of the Restoration published assessment results listed in Public Comment on Fair Market Value and Compensation Determination Plan, the notice. Copies of the restoration and and Maximum Economic Recovery; Lower Fox River/Green Bay Natural compensation determination plan, the Coal Lease Application UTU±78562; Resource Damage Assessment published assessment results listed in Whitmore Canyon Tract this notice, and the ’’Assessment Plan: AGENCY: Fish and Wildlife Service, Lower Fox River/Green Bay NRDA’’ AGENCY: Bureau of Land Management, Interior. (‘‘The Plan’’) issued on August 23, 1996 Utah, Interior.
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SUMMARY: The Bureau of Land determinations. Proprietary data marked Coal quantities and the FMV of the Management (BLM) announces a public as confidential may be submitted to the coal developed by BLM may or may not hearing concerning the proposed action Bureau of Land Management in change as a result of comments received of offering a Federal coal lease tract for response to this solicitation of public from the public and changes in market competitive coal lease sale and requests comments. Data so marked shall be conditions between now and when final public comment on the fair market treated in accordance with the laws and economic evaluations are completed. value of the coal resources and regulations governing the DATES: The public hearing will be held acknowledgement of any environmental confidentiality of such information. A in the BLM Price Field Office located at concerns concerning this proposed copy of the comments submitted by the 125 South, 600 West in Price, Utah, at action. The lands included in the public on fair market value and 7:00 p.m. on November 14, 2000. delineated Federal coal tract (Whitmore maximum economic recovery, except Written comments on fair market value Canyon) are located in Carbon County, those portions identified as proprietary and maximum economic recovery must Utah, approximately 4 miles north of by the author and meeting exemptions be received at the Bureau of Land East Carbon City. The surface in this stated in the Freedom of Information Management, Utah State Office, by area is both private and BLM Act, will be available for public November 30, 2000. administered public land with the coal inspection at the Bureau of Land FOR FURTHER INFORMATION CONTACT: Max being Federally owned. The Whitmore Management, Utah State Office during Nielson, 801–539–4038, Bureau of Land Canyon track is described as follows: regular business hours (8:00 a.m. to 4:00 Management, Utah State Office, T. 13 S., R. 13 E., SLM, Utah p.m.) Monday through Friday. Division of Natural Resources, P. O. Box Section 35: SE, S2SW; Comments on fair market value and 45155, Salt Lake City, Utah, 84145– T. 14 S., R. 13 E., SLM, Utah maximum economic recovery should be 0155. Section 1: Lots 2–4, S2NW, SW, W2SE, sent to the Bureau of Land Management SWNE; and should address, but not necessarily Dated: October 6, 2000. Section 12: Lots 1–4, S@N2, SE, NESW; be limited to, the following information: Ernest J. Eberhard, Section 13: NENE; Acting DSD, Natural Resources, Utah. T. 14 S., R. 14 E., SLM, Utah 1. The quality and quantity of the coal Section 6: Lot 6; resource. [FR Doc. 00–26305 Filed 10–30–00; 8:45 am] Section 7: Lots 3 and 4; 2. The mining method or methods BILLING CODE 4310±DQ±$$ Section 18: Lot 1, E2NW which would achieve maximum Containing 1,646.34 acres more or less. economic recovery of the coal, The Tract received application for a including specifications of seams to be DEPARTMENT OF THE INTERIOR mined and the most desirable timing coal lease by Andalex Resources Inc. Bureau of Land Management and the Intermountain Power Agency (a and rate of production. 50/50 joint ownership). The companies 3. The quantity of coal. [CO±500 0777±XQ±2527] plan to mine the coal as an extension 4. If this tract is likely to be mined as from their existing West Ridge Mining part of an existing mine and therefore be Front Range Resource Advisory operating if the lease is obtained. The evaluated on a realistic incremental Council (Colorado) Meeting basis, in relation to the existing mine to Whitmore Canyon Tract has one AGENCY: Bureau of Land Management, potentially minable coal seam which is which it has the greatest value. 5. If this tract should be evaluated as Interior. the Upper Sunnyside Seam. The ACTION: Notice of meeting. minable portions of the seam in this part of a potential larger mining unit area are from 6 to 9 feet in thickness and and evaluated as a portion of a new SUMMARY: In accordance with the average 8 feet. This tract contains an potential mine (i.e., a tract which does Federal Advisory Committee Act of estimated 15–20 million tons of not in itself form a logical mining unit). 1972 (FACA), 5 U.S.C. Appendix, notice recoverable coal. In-place coal samples 6. The configuration of any larger is hereby given that the next meeting of indicates the average coal quality as mining unit of which the tract may be the Front Range Resource Advisory follows 12,682 Btu/lb., 7 percent a part. Council (Colorado) will be held on 7. Restrictions to mining which may moisture, 6.7 percent ash, and 1.02 November 9 in Canon City, Colorado. affect coal recovery. The meeting is scheduled to begin at percent sulfur. The public is invited to 8. The price that the mined coal the hearing to make public or written 9:15 a.m. at the Holy Cross Abbey would bring when sold. Community Center, 2951 E. Highway comments on the environmental 9. Costs, including mining and 50, Canon City, Colorado. Topics will implications of leasing the proposed reclamation, of producing the coal and include an update on the Revision of the tract, and also to submit comments on the time of production. the fair market value (FMV) and the 10. The percentage rate at which Arkansas Headwaters Recreation Area maximum economic recovery (MER) of anticipated income streams should be Plan and election of officers. All the tract. discounted, either in the absence of Resource Advisory Council meetings are SUPPLEMENTARY INFORMATION: In inflation or with inflation, in which case open to the public. Interested persons accordance with Federal coal the anticipated rate of inflation should may make oral statements to the Council management regulations 43 CFR 4322 be given. at 9:30 a.m. or written statements may and 4325, a public hearing shall be held 11. Depreciation and other tax be submitted for the Council’s on the proposed sale to allow public accounting factors. consideration. The Center Manager may comment on and discussion of the 12. The value of any surface estate limit the length of oral presentations potential effects of mining and proposed where held privately. depending on the number of people lease. Not less than 30 days prior to the 13. Documented information on the wishing to speak. publication of the notice of sale, the terms and conditions of recent and DATES: The meeting is scheduled for Secretary shall solicit public comments similar coal land transactions in the Thursday, November 9, 2000 from 9:15 on fair market value appraisal and lease sale area. a.m. to 4 p.m. maximum economic recovery and on 14. Any comparable sales data of ADDRESSES: Bureau of Land factors that may affect these two similar coal lands. Management (BLM), Front Range
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Center, 3170 East Main Street, Canon plat was prepared to meet certain DEPARTMENT OF THE INTERIOR City, Colorado 81212. administrative needs of the Bureau of FOR FURTHER INFORMATION CONTACT: Ken Land Management. National Park Service Smith at (719) 269–8500. A supplemental plat was prepared to Notice of Request for Reinstatement, SUPPLEMENTARY INFORMATION: Summary identify various lands included in With Change, of a Previously minutes for the Council meeting will be Mineral Patent Application IDI29690, in Approved Information Collection maintained in the Canon City Center section 34, T. 7 S., R. 40 E., Boise and will be available for public Meridian, Idaho, accepted September AGENCY: National Park Service, DOI. inspection and reproduction during 12, 2000. The plat was prepared to meet ACTION: Notice and request for regular business hours within thirty (30) certain administrative needs of the comments. days following the meeting. Bureau of Land Management. SUMMARY: This notice announces that Dated: October 19, 2000. The plat representing the dependent the National Park Service’s (NPS’) John Carochi, resurvey of portions of the subdivisional lines, of canceled Mineral Survey No. intention to request from the Office of Acting Front Range Center Manager. Management and Budget (OMB) a [FR Doc. 00–27843 Filed 10–30–00; 8:45 am] 2806, and the segregation surveys of the Grey Eagle, Big Blue Bird, Golden Chest, reinstatement of, and revisions to, a BILLING CODE 4310±JB±P Ruby, and the Golden Wedge Lodes, and previously approved information the subdivision of sections 13, 14, and collection for certain activities related to 36 CFR Part 61. The title of 36 CFR Part DEPARTMENT OF THE INTERIOR 23, T. 40 N., R. 1 E., Boise Meridian, Idaho, Group Number 1039, was 61 is Procedures for State, Tribal, and Bureau of Land Management accepted September 21, 2000. The plat Local Government Historic Preservation was prepared to meet certain Programs. NPS has based the proposed [ID±957±1430±BJ] administrative needs of the U.S. Fish revisions on a fresh analysis of existing and Wildlife Service. requirements for responding and record Idaho: Filing of Plats of Survey keeping in certain elements of State and The plat representing the dependent local historic preservation programs. AGENCY: Bureau of Land Management, resurvey of a portion of the north Interior. NPS is publishing this notice in boundary and a portion of the accordance with the Paperwork ACTION: Notice. subdivisional lines, and a metes-and- Reduction Act of 1995 (44 U.S.C. 3507 bounds survey in section 6, T. 44 N., R. SUMMARY: The plats of the following et seq.) and OMB rules (5 CFR Part 5 W., Boise Meridian, Idaho, Group described lands were officially filed in 1320). Number 1071, was accepted September the Idaho State Office, Bureau of Land 21, 2000. The plat was prepared to meet DATES: NPS must receive comments Management, Boise, Idaho, effective certain administrative needs of the concerning this notice by January 2, 9:00 a.m., on the dates specified: The Bureau of Indian Affairs. 2001 to assure their consideration. plat representing the dependent ADDRESSES: Send comments on this resurvey of a portion of the The plat representing the dependent resurvey of a portion of the information collection to: subdivisional lines, and the subdivision Mr. John W. Renaud, Project of section 25, T. 1 N., R. 5 W., Boise subdivisional lines and a portion of the subdivision of section 18, and a metes- Coordinator, Branch of State, Tribal, and Meridian, Idaho, Group Number 1048, Local Programs Heritage Preservation was accepted July 12, 2000. The plat and-bounds survey within section 18, T. 44 N., R. 4 W., Boise Meridian, Idaho, Services, National Park Service, U.S. was prepared to meet certain Department of the Interior, 1849 C St., administrative needs of the Bureau of Group Number 1079, was accepted September 28, 2000. The plat was NW, NC 200, Washington, DC 20240 or Land Management. The field notes via e-mail at [email protected]. representing the correction of a portion prepared to meet certain administrative of Mineral Survey Number 3683, needs of the Bureau of Indian Affairs. FOR FURTHER INFORMATION CONTACT: Mr. Volume M–167, page 225, T. 12 N., R. The plat representing the dependent John W. Renaud, Project Coordinator, 37 E., Boise Meridian, Idaho, was resurvey of portions of the second Branch of State, Tribal, and Local accepted July 27, 2000. The field notes standard parallel south (south Programs, Heritage Preservations were prepared to meet certain boundary), north and west boundaries, Services Division, National Park administrative needs of the Bureau of and of the subdivision of sections 5, 6, Service, U.S. Department of the Interior, Land Management. 28, 29, and 32, T. 12 S., R. 21 E., Boise P.O. Box 37127, Washington, DC 20013– Meridian, Idaho, Group Number 1040, 7127, (202) 343–1059, The plat representing the entire _ survey record for the dependent was accepted September 29, 2000. The John [email protected]. resurvey of a portion of the south plat was prepared to meet certain SUPPLEMENTARY INFORMATION: boundary and subdivisional lines, and administrative needs of the Bureau of Title: 36 CFR Part 61, Procedures for the subdivision of section 33, T. 9 S., R. Land Management. State, Tribal, and Local Government 2 E., Boise Meridian, Idaho, Group FOR FURTHER INFORMATION CONTACT: Historic Preservation Programs. Number 1074, was accepted September Duane Olsen, Chief, Cadastral Survey, OMB Number: 1024–0038. 1, 2000. The plat was prepared to meet Idaho State Office, Bureau of Land Type of Request: Reinstatement, with certain administrative needs of the Management, 1387 South Vinnell Way, change, of a previously approved Bureau of Land Management. Boise, Idaho, 83709–1657, 208–373– collection for which approval has The plat representing the entire 3980. expired. survey record for the dependent Abstract: This information collection resurvey of a portion of the Dated: October 3, 2000. has an impact on State, Tribal, and local subdivisional lines, and the subdivision Duane E. Olsen, governments that wish to participate of section 4, T. 10 S., R. 2 E., Boise Chief, Cadastral Surveyor for Idaho. formally in the national historic Meridian, Idaho, Group Number 1076, [FR Doc. 00–26426 Filed 10–30–00; 8:45 am] preservation program and who wish to was accepted September 1, 2000. The BILLING CODE 4310±GG±P apply for Historic Preservation Fund
VerDate 112000 19:49 Oct 30, 2000 Jkt 194001 PO 00000 Frm 00059 Fmt 4703 Sfmt 4703 E:\FR\FM\31OCN1.SGM pfrm02 PsN: 31OCN1 Federal Register / Vol. 65, No. 211 / Tuesday, October 31, 2000 / Notices 64985 grant assistance. The National Park (2) The accuracy of the burden busy visitor areas and wilderness, was Service uses the information to ensure estimate including the validity of the not comprehensively addressed in the compliance with the National Historic method and assumptions used; existing GMP; (2) The existing GMP did Preservation Act and government-wide (3) The quality, utility, and clarity of not recognize that many existing grant requirements. the information to be collected; structures have historic significance and Respondents/Record Keepers: State, (4) Ways to minimize the burden, warrant full evaluation for adaptive re- Tribal, and Local Governments. including through the use of automated use rather than the proposed removal. Estimate of Burden: NPS estimates collection or other forms of information Further, the planned arrangement of that the public reporting burden for this technology; or, buildings, parking, courtyards, and collection of information will average (5) Any other aspect of this collection trails comprise significant cultural of information. 9.06 hours per response and 0.60 hours landscapes which would have been All responses to this notice will be per record, including the time for substantially altered by the existing plan summarized and included in the request reviewing instructions, searching without recognition of these values. existing data sources, gathering and for OMB approval. All comments will also become a matter of public record. There is a much greater awareness now maintaining the data needed and of cultural values that warrant revision reviewing the collection of information. Dated: October 25, 2000. of the plan, including historic Estimated Number of Respondents/ Leonard E. Stowe, structures, cultural landscapes, Record Keepers: NPS estimates that Information Collection Clearance Officer, archeology, ethnography, and the Native there are 450 respondents and 83 record National Park Service. American Grave Protection and keepers. This is the gross number of [FR Doc. 00–27840 Filed 10–30–00; 8:45 am] Repatriation Act; (3) It is unlikely that respondents and record keepers for all BILLING CODE 4310±70±M Petrified Forest National Park would of the documents included in this information collection. The net number receive the funding necessary to implement the proposals in the existing of States, Tribal, and local governments DEPARTMENT OF THE INTERIOR participating in this information GMP; (4) The sustainability of proposing collection annually is 136. The National Park Service a lot of new construction versus the frequency of response varies depending feasibility and sustainability of re-using upon activity. States complete Grant General Management Plan Revision, existing structures was not adequately application and end-of-year report Environmental Impact Statement, addressed in the existing plan; (5) More documents once a year. NPS requires Petrified Forest National Park, Arizona up-to-date information about handicapped accessibility is available; project documents at the beginning and AGENCY: National Park Service, (6) Effectively preventing wood theft end of each subgrant with a large Department of the Interior. Federal share. NPS reviews each State’s remains a very high priority, and more ACTION: Notice of intent to prepare an program once every four years. NPS information on visitor behavior is now environmental impact statement for the requires information from a local available; and (6) Bring plan into general management plan revision, government when it applies for conformance with current NPS planning Petrified Forest National Park. certification. NPS requires that each standards (NPS Director’s Order 2). State maintain one record for each SUMMARY: Under the provisions of the The National Park Service is planning property in its inventory and one record National Environmental Policy Act, the to begin public scoping in November, per project for tracking its responses to National Park Service is preparing an 2000 via a newsletter to American Federal agency requests for State environmental impact statement for the Indian tribes, neighboring communities, review. Pursuant to Section 101(d) of general management plan (GMP) county commissioners, organizations, the National Historic Preservation Act, revision for Petrified Forest National state and federal agencies, researchers federally recognized Indian Tribes, after Park. The environmental impact and institutions, the Congressional agreement with the National Park statement will be approved by the Delegation, and visitors who signed up Service (NPS), may assume Director, Intermountain Region. to be on the mailing list. There will also responsibilities specified in Section Petrified Forest National Park was be a web site and press releases. The 101(b)(3) and therefore use related established as a unit of the National purpose of the newsletter, web site, and information collections. Park System to preserve the mineralized press release is to explain the planning Estimated Number of Responses per remains of Mesozoic Forests (commonly process and to obtain comments Respondent: 1. known as the ‘‘Petrified Forest’’), concerning revision of the GMP. Estimated Number of Records per additional features of scenic and Comments may be addressed to the Record Keeper: 350. scientific interest, and the area’s natural Superintendent, and should be received Estimated Total Annual Burden on environment and cultural resources, for no later that 60-days from the Respondents: 4,078 hours. public use and benefit. It is located in publication of this Notice of Intent. Estimated Total Annual Burden on northeastern Arizona. The Petrified Record Keepers: 17,430 hours. Forest National Park Final General FOR FURTHER INFORMATION CONTACT: Estimated Total Annual Burden: Management Plan/Development Superintendent Michelle Hellickson, 21,508 hours. Concept Plans/Environmental Impact Petrified Forest National Park, P.O Box You may obtain copies of this Statement was approved in 1992. The 2217, Petrified Forest, AZ 86028; Tel: information collection from Mr. John W. new GMP revision will address new (520) 524–6228; FAX: (520) 524–3567; Renaud, Project Coordinator. perspectives on several key elements e-mail: [email protected]. NPS is soliciting comments regarding: that were not fully considered at the Dated: October 13, 2000. (1) Whether the collection of time of the plan: (1) The potential information is necessary for the proper impact of building/expanding proposed Ron Everhart, performance of the functions of NPS, new facilities into previously Director, Intermountain Region. including whether the information will undeveloped areas, particularly the [FR Doc. 00–27476 Filed 10–30–00; 8:45 am] have practical utility; increased visibility of facilities from BILLING CODE 4310±70±P
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DEPARTMENT OF THE INTERIOR Office of Public Affairs, National Park winter range for large ungulate species, Service, Department of Interior, 18th and closing north and west roads to National Park Service and C Streets NW, Washington, DC winter use. For GTNP and the Parkway, 20240, Telephone: (202) 208–6843. this alternative emphasizes the Winter Use Plans, Final Environmental SUPPLEMENTARY INFORMATION: protection of all resources by focusing Impact Statement for the Yellowstone This document presents and analyzes developments, oversnow motorized and Grand Teton National Parks and 7 alternatives for winter use trails and zones, and nonmotorized John D. Rockefeller, Jr., Memorial management in Yellowstone National trails and zones in certain areas, while Parkway, Wyoming Park (YNP), Grand Teton National Park still allowing park visitors opportunities AGENCY: National Park Service, (GTNP), and the John D. Rockefeller, Jr., for a range of winter recreational Department of the Interior. Memorial Parkway (the Parkway). experiences. The details and impacts of the ACTION: Availability of the Winter Use Alternative G, the preferred alternatives are described in this Plans, Final Environmental Impact alternative, emphasizes clean, quiet document. They include major long- Statement for the Yellowstone and access to the parks using the term beneficial improvements to the Grand Teton National Parks and John D. technologies available today. It would protection of geothermal winter range Rockefeller, Jr., Memorial Parkway. allow over-snow access on all routes currently available via NPS-managed and other park resources, some adverse SUMMARY: Pursuant to section 102(2)(c) snowcoach only. Other key changes in effects from visitor use activities, and of the National Environmental Policy recreation opportunities are: eliminating major beneficial improvements to the Act of 1969, the National Park Service winter plowing on the Colter Bay to desired visitor experience for solitude, announces the availability of the Winter Flagg Ranch route, making Flagg Ranch clean air, and natural quiet. These Use Plans, Final Environmental Impact a destination via over-snow transport, impacts vary by alternative. Statement for the Yellowstone and and eliminating all winter motorized FOR FURTHER INFORMATION CONTACT: Grand Teton National Parks and John D. use on Jackson Lake. This alternative Clifford Hawkes, National Park Service, Rockefeller, Jr., Memorial Parkway, addresses the full range of issues Denver Service Center, 12795 West Wyoming and Montana. regarding safety, natural resource Alameda Parkway, Lakewood, Colorado DATES: The DEIS was on public review impacts, visitor experience and access. 80228. from July 30, 1999 to December 15, It addresses the issues in a way that Dated: September 28, 2000. 1999. Responses to public comments are would make it necessary for local Karen P. Wade, addressed in the FEIS. The National economies to adapt, and for snowmobile Regional Director, Intermountain Region, Park Service (NPS) will entertain users to access the parks using a National Park Service. comments on the FEIS, although it is different mode of transport. Under [FR Doc. 00–27478 Filed 10–30–00; 8:45 am] not legally required to do so. All alternative A-No Action, current use BILLING CODE 4310±70±P comments must be received by October and management practices in the parks 31, 2000 and should be sent to: Clifford and Parkway continue. The concept Hawkes, PDS–P, National Park Service, under alternative B provides a moderate DEPARTMENT OF THE INTERIOR 12795 West Alameda Parkway, range of affordable and appropriate Lakewood, Colorado 80228 or the email winter visitor experiences. Air quality National Park Service address: [email protected]. and oversnow motor vehicle sound Comments received after this date will would be addressed, and by the winter National Park System Advisory Board; not be considered. Comments of 2008–2009, strict emission and sound Meeting transmitted by facsimile machine will requirements would be required by all AGENCY: National Park Service, Interior. not be considered. To meet a deadline oversnow vehicles entering the parks. ACTION: Notice of meeting. in a court-approved settlement This alternative also emphasizes an agreement for this EIS, the NPS cannot adaptive approach to park resource Notice is hereby given in accordance extend the comment period. management, which would allow the with the Federal Advisory Committee ADDRESSES: Copies of the FEIS are results of new and ongoing research and Act, 5 U.S.C. Appendix (1994), that the available from Clifford Hawkes, monitoring to be incorporated. National Park System Advisory Board National Park Service, Denver Service Alternative C maximizes winter visitor will meet November 14–16, 2000. The Center, 12795 West Alameda Parkway, opportunities for a range of park Board will tour Biscayne National Park Lakewood, Colorado 80228. Public experiences. Alternative D stresses on November 14, and will convene its reading copies of the plan are available visitor access to unique winter features business meeting on November 15 and on the Internet (www.nps.gov/planning) in the parks. This alternative 16 in the Crystal Ballroom of the and will be available for review at the emphasizes clean, quiet modes of travel, DoubleTree Hotel Miami Coconut following locations: visitor activities focused near Grove, 2649 South Bayshore Drive, Office of the Superintendent, destination areas, and a minimization of Miami, Florida 33133. Yellowstone NP, Yellowstone conflicts between nonmotorized and On November 15, the Board will National Park, Wyoming 82190, motorized users. Under alternative E the convene from 8:15 a.m. until 5:30 p.m. Telephone: (307) 344–2010. protection of wildlife and natural The Board will reconvene November 16 Office of the Superintendent, Grand resources is emphasized while allowing at 8:15 a.m. and adjourn at Teton NP, P.O. Drawer 170, Moose, park visitors access to a range of winter approximately 5:30 p.m. National Park WY 83012–0170, Telephone: (307) recreation experiences. Alternative E Service Deputy Director Denis Galvin 739–3452. uses an adaptive planning approach that will address the Board. The Board will Planning and Environmental Quality, allows new information to be consider procedural matters relative to Intermountain Support Office-Denver, incorporated over time. Alternative F its study of the future of the National National Park Service, P.O. Box stresses the protection of wildlife Park Service and the National Park 25287, Denver, CO 80225–0287, resources by focusing winter visitor System, and will consider reports from Telephone: (303) 969–2851. activities in YNP outside important its Landmarks Committee, Cumberland
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Island Committee, and Revolutionary to the Secretary of Commerce on e.g., permitting electronic submission of War and War of 1812 Committee. November 6, 2000; Commissioners’ responses. National Historic Landmark opinions are currently scheduled to be Overview of This Information nominations will be reviewed during transmitted to the Secretary of Collection the report of the Landmarks Committee Commerce on November 14, 2000.) at the November 16 morning session. 5. Outstanding action jackets: none. (1) Type of Information Collection: The Board may be addressed at In accordance with Commission Extension of a currently approved various times by other officials of the policy, subject matter listed above, not collection. National Park Service and the disposed of at the scheduled meeting, (2) Title of the Form/Collection: Department of the Interior; and other may be carried over to the agenda of the Application for Issuance or miscellaneous topics and reports may be following meeting. Replacement of Northern Mariana Card. covered. The order of the agenda may be Issued: October 26, 2000. (3) Agency form number, if any, and changed, if necessary, to accommodate By order of the Commission. the applicable component of the travel schedules or for other reasons. Donna R. Koehnke, Department of Justice sponsoring the The Board meeting will be open to the Secretary. collection: Form I–777. Adjudications public. Space and facilities to Division, Immigration and [FR Doc. 00–28018 Filed 10–27–00; 1:47 pm] accommodate the public are limited and Naturalization Service. BILLING CODE 7020±02±P attendees will be accommodated on a (4) Affected public who will be asked first-come basis. Anyone may file with or required to respond, as well as a brief the Board a written statement abstract: Primary: Individuals or concerning matters to be discussed. The DEPARTMENT OF JUSTICE Households. This information collection Board may also permit attendees to is used by applications to apply for a Immigration and Naturalization Service address the Board, but may restrict the Northern Mariana identification card if length of the presentations, as necessary they received United States citizenship to allow the Board to complete its Agency Information Collection Activities; Comment Request pursuant to Pub. L. 94–241 (Covenant to agenda within the allotted time. Establish a Commonwealth of the Anyone who wishes further ACTION: Notice of information collection Northern Mariana Island). information concerning the meeting, or under review; application for issuance (5) An estimate of the total number of who wishes to submit a written or replacement of Northern Mariana respondents and the amount of time statement, may contact Mr. Loran card. estimated for an average respondent to Fraser, Office of Policy, National Park respond: 100 responses at 30 minutes Service, 1849 C Street, NW, The Department of Justice, (.50 hours) per response. Washington, DC 20240 (telephone 202– Immigration and Naturalization Service (6) An estimate of the total public 208–7456). has submitted the following information burden (in hours) associated with the Draft minutes of the meeting will be collection request for review and collection: 50 annual burden hours. available for public inspection about 12 clearance in accordance with the weeks after the meeting, in room 2414, If you have additional comments, Paperwork Reduction Act of 1995. The suggestions, or need a copy of the Main Interior Building, 1849 C Street, proposed information collection is NW, Washington, DC. proposed information collection published to obtain comments from the instrument with instructions, or Dated: October 24, 2000. public and affected agencies. Comments additional information, please contact Robert Stanton, are encouraged and will be accepted for Richard A. Sloan 202–514–3291, Director, National Park Service. ‘‘sixty days’’ until January 2, 2001. Director, Policy Directives and [FR Doc. 00–27868 Filed 10–30–00; 8:45 am] Written comments and suggestions Instructions Branch, Immigration and from the public and affected agencies BILLING CODE 4310±70±P Naturalization Service, U.S. Department concerning the proposed collection of of Justice, Room 4034, 425 I Street NW., information should address one or more Washington, DC 20536. Additionally, of the following four points: comments and/or suggestions regarding INTERNATIONAL TRADE (1) Evaluate whether the proposed COMMISSION the item(s) contained in this notice, collection of information is necessary especially regarding the estimated Sunshine Act Meeting for the proper performance of the public burden and associated response functions of the agency, including time may also be directed to Mr. AGENCY HOLDING THE MEETING: United whether the information will have Richard A. Sloan. practical utility; States International Trade Commission. If additional information is required (2) Evaluate the accuracy of the TIME AND DATE: November 6, 2000 at 2:00 contact: Mr. Robert B. Briggs, Clearance agencies estimate of the burden of the p.m. Officer, United States Department of proposed collection of information, Justice, Information Management and PLACE: Room 101, 500 E Street S.W., including the validity of the Security Staff, Justice Management Washington, DC 20436, Telephone: methodology and assumptions used; Division, National Place Building, 1331 (202) 205–2000. (3) Enhance the quality, utility, and Pennsylvania Avenue, NW., Suite 1220, STATUS: Open to the public. clarity of the information to be Washington, DC 20530. MATTERS TO BE CONSIDERED: collected; and 1. Agenda for future meeting: none. (4) Minimize the burden of the Dated: October 26, 2000. 2. Minutes. collection of information on those who Richard A. Sloan, 3. Ratification List. are to respond, including through the Department Clearance Officer, United States 4. Inv. No. 731–TA–891 (Preliminary) use of appropriate automated, Department of Justice, Immigration and (Foundry Coke from China)—briefing electronic, mechanical, or other Naturalization Service. and vote. (The Commission is currently technological collection techniques or [FR Doc. 00–27931 Filed 10–30–00; 8:45 am] scheduled to transmit its determination other forms of information technology, BILLING CODE 4410±10±M
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DEPARTMENT OF JUSTICE determine whether an applicant for are encouraged and will be accepted for Temporary Protected Status (TPS) meets sixty days until January 2, 2001. Immigration and Naturalization Service the eligibility requirements. Such TPS Written comments and suggestions benefits include employment from the public and affected agencies Agency Information Collection authorization and relief from the threat concerning the proposed collection of Activities: Comment Request of removal or deportation from the U.S. information should address one or more while in such status. of the following four points: ACTION: Notice of information collection (5) An estimate of the total number of (1) Evaluate whether the proposed under review; application for temporary respondents and the amount of time collection of information is necessary protected status. estimated for an average respondent to for the proper performance of the The Department of Justice, respond: 176,000 responses at 30 functions of the agency, including Immigration and Naturalization Service minutes (.50 hours) per response. whether the information will have has submitted the following information (6) An estimate of the total public practical utility; collection request for review and burden (in hours) associated with the (2) Evaluate the accuracy of the clearance in accordance with the collection: 88,000 annual burden hours. agencies estimate of the burden of the Paperwork Reduction Act of 1995. The If you have additional comments, proposed collection of information, proposed information collection is suggestions, or need a copy of the including the validity of the published to obtain comments from the proposed information collection methodology and assumptions used; (3) Enhance the quality, utility, and public and affected agencies. Comments instrument with instructions, or clarity of the information to be are encouraged and will be accepted for additional information, please contact collected; and sixty days until January 2, 2001. Richard A. Sloan 202–514–3291, (4) Minimize the burden of the Written comments and suggestions Director, Policy Directives and collection of information on those who from the public and affected agencies Instructions Branch, Immigration and are to respond, including through the concerning the proposed collection of Naturalization Service, U.S. Department use of appropriate automated, information should address one or more of Justice, Room 4034, 425 I Street, NW., electronic, mechanical, or other of the following four points: Washington, DC 20536. Additionally, technological collection techniques or (1) Evaluate whether the proposed comments and/or suggestions regarding other forms of information technology, collection of information is necessary the item(s) contained in this notice, e.g., permitting electronic submission of for the proper performance of the especially regarding the estimated public burden and associated response responses. functions of the agency, including Overview of this information whether the information will have time may also be directed to Mr. Richard A. Sloan. collection: practical utility; (1) Type of Information Collection: (2) Evaluate the accuracy of the If additional information is required contact: Mr. Robert B. Briggs, Clearance Extension of a currently approved agencies estimate of the burden of the collection. proposed collection of information, Officer, United States Department of Justice, Information Management and (2) Title of the Form/Collection: including the validity of the Request for Certification of Military or methodology and assumptions used; Security Staff, Justice Management Division, National Place Building, 1331 Naval Service. (3) Enhance the quality, utility, and (3) Agency form number, if any, and clarity of the information to be Pennsylvania Avenue, NW., Suite 1220, Washington, DC 20530. the applicable component of the collected; and Department of Justice sponsoring the (4) Minimize the burden of the Dated: October 26, 2000. collection: Form N–426. Adjudications collection of information on those who Richard A. Sloan, Division, Immigration and are to respond, including through the Department Clearance Officer, Immigration Naturalization Service. use of appropriate automated, and Naturalization Service, Department of (4) Affected public who will be asked electronic, mechanical, or other Justice. or required to respond, as well as a brief technological collection techniques or [FR Doc. 00–27932 Filed 10–30–00; 8:45 am] abstract: Primary: Individuals or other forms of information technology, BILLING CODE 4410±10±M Households. This form will be used by e.g., permitting electronic submission of the Service to request a verification of responses. the military or naval service claim by an Overview of this information DEPARTMENT OF JUSTICE applicant filing for naturalization on the collection: basis of honorable service in the U.S. Immigration and Naturalization Service (1) Type of Information Collection: armed forces. Extension of a currently approved Agency Information Collection (5) An estimate of the total number of collection. Activities: Comment Request respondents and the amount of time (2) Title of the Form/Collection: estimated for an average respondent to Application for Temporary Protected ACTION: Notice of information collection respond: 45,000 responses at 45 minutes Status. under review; request for certification of per response. (3) Agency from number, if any, and military or naval service. (6) An estimate of the total public the applicable component of the burden (in hours) associated with the Department of Justice sponsoring the The Department of Justice, collection: 33,750 annual burden hours. collection: Form I–821. Adjudications Immigration and Naturalization Service If you have additional comments, Division, Immigration and has submitted the following information suggestions, or need a copy of the Naturalization Service. collection request for review and proposed information collection (4) Affected public who will be asked clearance in accordance with the instrument with instructions, or or required to respond, as well as a brief Paperwork Reduction Act of 1995. The additional information, please contact abstract: Primary: Individuals or proposed information collection is Richard A. Sloan 202–514–3291, Households. The information provided published to obtain comments from the Director, Policy Directives and on this collection is used by the INS to public and affected agencies. Comments Instructions Branch, Immigration and
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Naturalization Service, U.S. Department are to respond, including through the Dated: October 26, 2000. of Justice, Room 4034, 425 I Street, NW., use of appropriate automated, Richard A. Sloan, Washington, DC 20536. Additionally, electronic, mechanical, or other Department Clearance Officer, Immigration comments and/or suggestions regarding technological collection techniques or and Naturalization Service, Department of the item(s) contained in this notice, other forms of information technology, Justice. especially regarding the estimated e.g., permitting electronic submission of [FR Doc. 00–27934 Filed 10–30–00; 8:45 am] public burden and associated response response. BILLING CODE 4410±10±M time may also be directed to Mr. Overview of this information Richard A. Sloan. collection: If additional information is required DEPARTMENT OF JUSTICE contact: Mr. Robert B. Briggs, Clearance (1) Type of Information Collection: Officer, United States Department of Extension of a currently approved Immigration and Naturalization Service Justice, Information Management and collection. Agency Information Collection Security Staff, Justice Management (2) Title of the Form/Collection: Activities: Comment Request Division, National Place Building, 1331 Application to File Declaration of Pennsylvania Avenue, NW., Suite 1220, Intention. ACTION: Notice of information collection Washington, DC 20530. (3) Agency form number, if any, and under review; application for Dated: October 26, 2000. the applicable component of the replacement/initial nonimmigrant Richard A. Sloan, Department of Justice sponsoring the arrival-departure document. collection: Form N–300. Adjudications Department Clearance Officer, Immigration The Department of Justice, and Naturalization Service, Department of Division, Immigration and Immigration and Naturalization Service Justice. Naturalization Service. has submitted the following information [FR Doc. 00–27933 Filed 10–30–00; 8:45 am] (4) Affected public who will be asked collection is published to obtain BILLING CODE 4410±10±M or required to respond, as well as a brief comments from the public and affected abstract: Primary: Individuals or agencies. Comments are encouraged and Households. This form will be used by DEPARTMENT OF JUSTICE will be accepted for sixty days until permanent residents to file a declaration January 2, 2001. Immigration and Naturalization Service of intention to become a citizen of the Written comments and suggestions United States. This collection is also from the public and affected agencies Agency Information Collection used to satisfy documentary concerning the proposed collection of Activities: Comment Request requirements for those seeking to work information should address one or more in certain occupations or professions, or of the following four points: ACTION: Notice of information collection to obtain various licenses. (1) Evaluate whether the proposed under review; application to file (5) An estimate of the total number of collection of information is necessary declaration of intention. respondents and the amount of time for the proper performance of the functions of the agency, including estimated for an average respondent to The Department of Justice, whether the information will have respond: 1,015 responses at 45 minutes Immigration and Naturalization Service practical utility; has submitted the following information per response. (2) Evaluate the accuracy of the collection request for review and (6) An estimate of the total public agencies estimate of the burden of the clearance in accordance with the burden (in hours) associated with the proposed collection of information, Paperwork Reduction Act of 1995. The collection: 761 annual burden hours. including the validity of the proposed information collection is If you have additional comments, methodology and assumptions used; published to obtain comments from the suggestions, or need a copy of the (3) Enhance the quality, utility, and public and affected agencies. Comments proposed information collection clarity of the information to be are encouraged and will be accepted for instrument with instructions, or collected; and sixty days until January 2, 2001. additional information, please contact (4) Minimize the burden of the Written comments and suggestions collection of information on those who from the public and affected agencies Richard A. Sloan 202–514–3291, Director, Policy Directives and are to respond, including through the concerning the proposed collection of use of appropriate automated, information should address one or more Instructions Branch, Immigration and Naturalization Service, U.S. Department electronic, mechanical, or other of the following four points: technological collection techniques or (1) Evaluate whether the proposed of Justice, Room 4034, 425 I Street, NW., Washington, DC 20536. Additionally, other forms of information technology, collection of information is necessary e.g., permitting electronic submission of for the proper performance of the comments and/or suggestions regarding the item(s) contained in this notice, responses. functions of the agency, including Overview of this information especially regarding the estimated whether the information will have collection: public burden and associated response practical utility; (1) Type of Information Collection: time may also be directed to Mr. (2) Evaluate the accuracy of the Extension of a currently approved Richard A. Sloan. agencies estimate of the burden of the collection. proposed collection of information, If additional information is required (2) Title of the Form/Collection: including the validity of the contact: Mr. Robert B. Briggs, Clearance Application for Replacement/Initial methodology and assumptions used; Officer, United States Department of Nonimmigrant Arrival-Departure (3) Enhance the quality, utility, and Justice, Information Management and Document. clarity of the information to be Security Staff, Justice Management (3) Agency form number, if any, and collected; and Division, National Place Building, 1331 the applicable component of the (4) Minimize the burden of the Pennsylvania Avenue, NW., Suite 1220, Department of Justice sponsoring the collection of information on those who Washington, DC 20530. collection: Form I–102. Adjudications
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Division, Immigration and collection request for review and proposed information collection Naturalization Service. clearance in accordance with the instrument with instructions, or (4) Affected public who will be asked Paperwork Reduction Act of 1995. The additional information, please contact or required to respond, as well as a brief proposed information collection is Richard A. Sloan 202–514–3291, abstract: Primary: Individuals or published to obtain comments from the Director, Policy Directives and Households. The information collection public and affected agencies. Comments Instructions Branch, Immigration and will be used by an alien temporarily are encouraged and will be accepted for Naturalization Service, U.S. Department residing in the United States to request ‘‘sixty days’’ until January 2, 2001. of Justice, Room 4034, 425 I Street, NW., a replacement of his or her arrival Written comments and suggestions Washington, DC 20536. Additionally, evidence. The information provided can from the public and affected agencies comments and/or suggestions regarding be used to verify status and for concerning the proposed collection of the item(s) contained in this notice, determination as to the eligibility of the information should address one or more especially regarding the estimated applicant for replacement. of the following four points: public burden and associated response (5) An estimate of the total number of (1) Evaluate whether the proposed time may also be directed to Mr. respondents and the amount of time collection of information is necessary Richard A. Sloan. estimated for an average respondent to for the proper performance of the If additional information is required respond: 20,000 responses at 25 minutes functions of the agency, including contact: Mr. Robert B. Briggs, Clearance (.416 hours) per response. whether the information will have Officer, United States Department of (6) An estimate of the total public practical utility; Justice, Information Management and burden (in hours) associated with the (2) Evaluate the accuracy of the Security Staff, Justice Management collection: 8,320 annual burden hours. agencies estimate of the burden of the Division, National Place Building, 1331 If you have additional comments, proposed collection of information, Pennsylvania Avenue, NW., Suite 1220, suggestions, or need a copy of the including the validity of the Washington, DC 20530. proposed information collection methodology and assumptions used; Dated: October 26, 2000. instrument with instructions, or (3) Enhance the quality, utility, and additional information, please contact clarity of the information to be Richard A. Sloan, Richard A. Sloan 202–514–3291, collected; and Department Clearance Officer, United States Director, Policy Directives and (4) Minimize the burden of the Department of Justice, Immigration and Naturalization Service. Instructions Branch, Immigration and collection of information on those who Naturalization Service, U.S. Department are to respond, including through the [FR Doc. 00–27936 Filed 10–30–00; 8:45 am] of Justice, Room 4034, 425 I Street, NW., use of appropriate automated, BILLING CODE 4410±10±M Washington, DC 20536. Additionally, electronic, mechanical, or other technological collection techniques or comments and/or suggestions regarding DEPARTMENT OF JUSTICE the item(s) contained in this notice, other forms of information technology, especially regarding the estimated e.g., permitting electronic submission of Bureau of Justice Assistance public burden and associated response responses. time may also be directed to Mr. Overview of this information [OJP(BJA)±1296] Richard A. Sloan. collection: If additional information is required (1) Type of Information Collection: Notice of Availability of the Finding of contact: Mr. Robert B. Briggs, Clearance Extension of currently approved No Significant Impact and the Officer, United States Department of collection. Environmental Assessment for BJA's Justice, Information Management and (2) Title of the Form/Collection: Methamphetamine Law Enforcement Security Staff, Justice Management Application for Action on an Approved Program Division, National Place Building, 1331 Application or Petition. (3) Agency form number, if any, and AGENCY: Office of Justice Programs, Pennsylvania Avenue, Suite 1220, Bureau of Justice Assistance (BJA), Washington, DC 20530. the applicable component of the Department of Justice sponsoring the Justice. Dated: October 26, 2000. collection: Form I–824. Adjudications ACTION: Notice of availability of FONSI Richard A. Sloan, Division, Immigration and and EA. Department Clearance Officer, Immigration Naturalization Service. and Naturalization Service. Department of (4) Affected public who will be asked SUMMARY: The Environmental Justice. or required to respond, as well as a brief Assessment, which is available to the [FR Doc. 00–27935 Filed 10–30–00; 8:45 am] abstract: Primary: Individuals or public, concludes that the BILLING CODE 4410±10±M Households. This information collection methamphetamine investigation and is used to request a duplicate approval clandestine laboratory closure activities notice, to notify and to verify to the U.S. of the Methamphetamine/Drug Hot DEPARTMENT OF JUSTICE Consulate that a petition has been Spots Program will not have a approved or that a person has been significant impact on the quality of the Immigration and Naturalization Service adjusted to permanent resident status. human environment. FOR FURTHER INFORMATION CONTACT: For Agency Information Collection (5) An estimate of the total number of copies of the Environmental Activities; Comment Request respondents and the amount of time estimated for an average respondent to Assessment, please contact: Pat Kim, ACTION: Notice of information collection respond: 43,772 responses at 25 minutes BJA Environmental Coordinator, Bureau under review; application for action on (416) per response. of Justice Assistance, 810 7th Street, an approved application or petition. (6) An estimate of the total public NW., Room 7252, Washington, DC burden (in hours) associated with the 20531; Phone: (202) 514–9677; E-mail: The Department of Justice, collection: 18,209 annual burden hours. [email protected]. Copies of the Immigration and Naturalization Service If you have additional comments, Environmental Assessment are also has submitted the following information suggestions, or need a copy of the available on BJA’s Website at
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Therefore, an other forms of information technology, Council on Environmental Quality’s Environmental Impact Statement will e.g., permitting electronic submission of regulations, 40 CFR parts 1500 through not be prepared for the funding of this responses. 1508, has prepared an Environmental program. Type of Review: Extension of Assessment for methamphetamine law currently approved collection. Nancy E. Gist, Agency: Employment Standards enforcement programs, and with Director, Bureau of Justice Assistance. Administration (ESA). specific application for the [FR Doc. 00–27839 Filed 10–30–00; 8:45 am] Title: Regulations Governing the Methamphetamine/Drug Hot Spots BILLING CODE 4410±18±P Administration of the Longshore and Program. The Methamphetamine/Drug Harbor Workers’ Compensation Act. Hot Spots Program addresses a broad OMB Number: 1215–0160. array of law enforcement initiatives DEPARTMENT OF LABOR Description: The regulations and pertaining to the investigation of associated forms cover the submission methamphetamine trafficking in many Office of the Secretary of information necessary for the heavily impacted areas of the country. processing of claims for benefits under For the purposes of this program, law Submission for OMB Review; the Longshore Act. enforcement may include training of Comment Request law enforcement officers in Ira L. Mills, methamphetamine-related issues; October 20, 2000. Departmental Clearance Officer. collection and maintenance of The Department of Labor (DOL) has [FR Doc. 00–27937 Filed 10–30–00; 8:45 am] intelligence and information relative to submitted the following public BILLING CODE 4510±49±M methamphetamine trafficking and information collection requests (ICRs) to traffickers; investigation, arrest and the Office of Management and Budget prosecution of producers, traffickers and (OMB) for review and approval in DEPARTMENT OF LABOR users of methamphetamine; interdiction accordance with the Paperwork and removal of laboratories, finished Reduction Act of 1995 (Pub. L. 104–13, Employment and Training products, and precursor chemicals and 44 U.S.C. Chapter 35). A copy of each Administration other elements necessary to produce individual ICR, with applicable Workforce Investment Act, Section methamphetamine; and preventive supporting documentation, may be 171(d), Demonstration Program: efforts to reduce the spread and use of obtained by calling the Department of Incumbent/Dislocated Worker Skill methamphetamine. Individual projects Labor. To obtain documentation for Shortage II Demonstration Program will reflect a concentration on program BLS, ETA, PWBA, and OASAM contact areas consistent with the Congressional Karin Kurz ((202) 693–4127 or by E-mail AGENCY: Employment and Training appropriations language. to [email protected]). To obtain Administration, Labor. Among the many challenges faced by documentation for ESA, MSHA, OSHA, ACTION: Notice of Availability of Funds law enforcement agencies in the and VETS contact Darrin King ((202) and Solicitation for Grant Applications Methamphetamine/Drug Hot Spots 693–4129 or by E-Mail to King- (SGA). Program, will be discovery, interdiction, [email protected]). and dismantling of clandestine drug Comments should be sent to Office of This notice contains all of the laboratories. These lab sites, as well as Information and Regulatory Affairs, necessary information and forms needed other methamphetamine crime venues Attn: OMB Desk Officer for BLS, DM, to apply for grant funding. must be comprehensively dealt with in ESA, ETA, MSHA, OSHA, PWBA, or SUMMARY: The U.S. Department of Labor compliance with a variety of health, VETS, Office of Management and (DOL), Employment and Training safety and environmental regulations. Budget, Room 10235, Washington, DC Administration (ETA), announces a The Bureau of Justice Assistance 20503 ((202) 395–7316), within 30 days second demonstration program to test anticipates that law enforcement efforts from the date of this publication in the the ability of the workforce funded under this program, when Federal Register. development system to create projects encountering illegal drug laboratories, The OMB is particularly interested in or industry-led consortia for the purpose will use grant funds to effect the proper comments which: of upgrading current workers, designing removal and disposal of hazardous • Evaluate whether the proposed or adapting training curricula in skills materials located at those laboratories collection of information is necessary shortage occupational areas, or in and directly associated sites. Where for the proper performance of the regionally important business/industry grant funds are not used to effect clean- functions of the agency, including areas including manufacturing and up of hazardous waste sites, grantees whether the information will have machining, and specialized industrial must document in their applications practical utility; areas such as plastics, how they will remediate clandestine • Evaluate the accuracy of the telecommunications and the drug laboratories that are seized as a agency’s estimate of the burden of the environment, and to recruit/retrain result of grant-related activities. proposed collection of information, workers in these occupations. including the validity of the DATES: The closing date for receipt of Environmental Assessment methodology and assumptions used; this application is January 16, 2001. BJA will award 16 grants to State and • Enhance the quality, utility, and Applications must be received by 4:00 local criminal justice agencies clarity of the information to be p.m. Eastern Time. No exceptions to the consistent with congressional earmarks collected; and mailing and hand-delivery conditions
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The purpose of this demonstration Withdrawal of Applications. mailed or hand-delivered to: U.S. program is to test the ability of the Applications may be withdrawn by Department of Labor; Employment and workforce development system to create written notice or telegram (including a Training Administration, Division of projects or industry-led consortia for the mail gram) received at any time before Federal Assistance, Attention: Marian G. purpose of upgrading current workers, an award is made. Applications may be Floyd, Reference: SGA/DAA 00–113, designing or adapting training curricula 200 Constitution Avenue, NW, Room S– withdrawn in person by the applicant or by an authorized representative thereof, in skills shortage occupational areas, or 4203, Washington, D.C. 20210. in regionally important business/ Hand-Delivered Proposals. Proposals if the representative’s identity is made known and the representative signs a industry areas including manufacturing should be mailed at least five (5) days and machining, and specialized prior to the closing date. However, if receipt for the proposal. industrial areas such as plastics, proposals are hand delivered, they must FOR FURTHER INFORMATION CONTACT: Fax telecommunications and the be received at the designated address by questions to Marian G. Floyd, Division environment, and to recruit/retrain 4:00 p.m., Eastern Time on Tuesday, of Federal Assistance at (202) 219–8739 workers in these occupations. The January 16, 2001. All overnight mail (this is not a toll-free number). All will be considered to be hand-delivered inquiries sent via a fax should include dislocated and/or incumbent workers and must be received at the designated the SGA/DAA 00–113 and contact who will be assisted by these efforts place by the specified closing date and name, fax and phone number. This include specific groups such as time. Telegraphed, e-mailed and/or solicitation will also be published on agricultural workers, low skilled faxed proposals will not be honored. the Internet on the Employment and workers, and those needing assistance Failure to adhere to the above Training Administration’s (ETA) Home in overcoming barriers to employment. instructions will be a basis for a Page at http://www.doleta.gov. Award These barriers to employment may be determination of non responsiveness. notifications will also be published on caused by living in rural communities, Late Proposals. A proposal received at the ETA Home Page. having limited options for the office designated in the solicitation SUPPLEMENTARY INFORMATION: ETA is transportation to work, having after the exact time specified for receipt soliciting proposals on a competitive inadequate or obsolete skills or having will not be considered unless it is basis for the incumbent/dislocated skills in declining occupations. The received before the award is made and workers’ skill shortage II demonstration focus of these efforts will be on skills was either: program. It is envisioned that the training in skills shortage occupations • Sent by U.S. Postal Service Express program will encompass the upgrading including welding and metals, new and Mail Next Day Service Post Office to of current workers, designing or growing occupations in technological Addressee, not later than 5:00 p.m. at adapting training curricula in skills fields such as information technology, the place of mailing two working days shortage occupational areas, or in telecommunications, and other fields in prior to the date specified for receipt of regionally important business/industry which technology skills are critical parts the proposals. The term ‘‘working days’’ areas including manufacturing and of the jobs emerging in their regional exclude weekends and U.S. Federal machining, and specialized industrial labor markets. Any consortia established holidays. areas. as a result of this competition would • Sent by U.S. Postal Service This announcement consists of five also be expected to enhance the strategic registered or certified mail not later than (5) parts: planning efforts and policy efforts of the fifth (5th) calendar day before the • Part I—Background. • local boards under the Workforce date specified for receipt of applications Part II—Eligible Applicants and the Investment Act in these areas. (e.g., an offer submitted in response to Application Process. a solicitation requiring receipt of • Part III—Statement of Work. This $8.2 million dislocated and • applications by the 20th of the month Part IV—Rating Criteria and Award incumbent worker demonstration Selection Process. program will support the creation of must be mailed by the 15th). The only • acceptable evidence to establish the date Part V—Monitoring, Reporting and projects to respond to employer- of mailing of a late proposal sent by Evaluation. identified skill shortages in regional labor markets with a focus on assisting either U.S. Postal Service registered or Part I. Background certified mail is the U.S. postmark both the types of workers and types of on the envelope or wrapper and on the A. Authority occupational-industrial areas noted original receipt from the U.S. Postal Section 171(d) of the Workforce above. Such projects could encompass Service. Both postmarks must show a Investment Act of 1998 (WIA) (29 U.S.C. the creation of industry-led consortia legible date or the proposal shall be 2916) authorizes the use of funds for which can design or adapt training processed as if mailed late. ‘‘Postmark’’ demonstration projects from funds made curricula in skill shortage occupational means a printed, stamped, or otherwise available to the Secretary under Section areas or in key regional businesses. This placed impression (exclusive of a 132(a)(2)(A) of WIA (29 U.S.C. 2862). In program will build on two Departmental postage meter machine impression) that addition, the DOL FY 2000 demonstration programs announced in is readily identifiable without further Appropriations Act of November 17, June 2000—the $9.2 million action as having been supplied and 1999, authorizes dislocated worker comprehensive incumbent/dislocated affixed by an employee of the U.S. demonstration projects that provide worker retraining demonstration and the Postal Service on the date of the assistance to new entrants in the $10.3 million demonstration program mailing. Therefore, offerors should workforce and incumbent workers. for training in high skill jobs to meet request the postal clerk to place a legible Demonstration program grantees must critical labor shortages.
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Part II. Eligible Applicants and the In addition to those provisions, demonstration with the delivery of Application Process prospective applicants should be aware services under other programs (public or that grant funds may not be used for the private), available to all or part of the A. Eligible Applicants and Participants following purposes: target group. Projects linking or Any organization capable of fulfilling (a) for training that an employer is in collaborating with an existing WIA the terms and conditions of this a position to provide and would have funded One-Stop/Career Center and/or solicitation may apply. Applicants provided in the absence of the requested local Workforce Investment Board should note that, prior to any selection grant; located within a project area fulfill this as a grantee, ETA will review its agency (b) to pay salaries for program requirement. The use of Pell Grants for records to assess the applicant participants; and eligible workers or the use of State organization’s overall record in (c) for acquisition of production training or education funds provided for administering federal funds as provided equipment. dislocated workers or certain types of in 20 CFR 667.170. Applicants also Applicants may budget limited employers should also be addressed in should know that this is a risk free amounts of grant funds to work with the application. Where appropriate, federal program; therefore, all for profit technical experts or consultants to partnerships should also include trade organizations that apply will not be able provide advice and develop more unions, manufacturing extension to receive a fee if awarded a grant. complete project plans after a grant programs, economic development All participants who receive services award, however, the level of details in organizations, training institutions, and in projects funded under this the project plan may affect the amount other local stakeholders. Any efforts demonstration program must be either: of funding provided. proposed in isolation will not have the (a) Eligible dislocated workers as Grant activities may include: maximum impact on building capacity defined at Section 101(9) of the (a) development, testing and initial within that region or industry and are Workforce Investment Act. This section application of curricula focused on not likely to be funded. of the law may be viewed at http:// intensive, short-term training to get usworkforce.org/asp/act.asp Proposed participants into productive, high D. Wages projects may target subgroups of the demand employment as quickly as Proposals must provide assurance that eligible population based on factors possible; all participating firms which employ such as, but not limited to occupation, (b) working with employers to successful training completers have industry, nature of dislocation, and develop and apply worksite-based committed to pay wages to these reason for unemployment; or learning strategies that utilize cutting- completers at the wage level set by any (b) Incumbent workers. These are edge technology and equipment; collective bargaining agreement which currently-employed workers whose (c) development of employer-based covers positions to be filled by the employers have determined that the training programs that will take project participants, or, if no such workers require training in order to help advantage of opportunities created by agreement exists, at a level at least equal keep their firms competitive and the employers’ needs for workers with new to meeting the lower living standard subject workers employed, avert layoffs, skills; income level as defined in Section upgrade workers’ skills, increase wages (d) development and initial 101(24) of WIA. earned by employees and/or keep application of contextual learning workers’ skills competitive. Such opportunities for participants to learn E. Grant Awards training would support further job occupational theory in a classroom It is anticipated that $8.2 million will retention and career development for setting while applying that learning in be available to fund these projects. DOL improved economic self-sufficiency for an on-the-job setting; anticipates awarding 6 to 12 grants, with employed workers, especially those (e) use of curriculum and skills an estimated range of $200,000 to $3 most vulnerable to job loss, and increase training programs that are designed to million per grant, with no individual the capability of the employing firm(s) impart learning to meet employer- grant exceeding $3 million. to access and retain skilled workers. specified or industry specific skill standards or certification requirements; F. Period of Performance B. Allowable Activities (f) convening of an Employer The period of performance shall be 24 Funds provided through this Advisory Board to identify skills gaps of months from the date of execution by demonstration may be used only to job applicants and present workers the Government. provide services of the types described which effect competitive production at Sections 134 (d)(2)(A–D)(J)(ii)(K), and to develop a strategy for retraining; G. Option To Extend (d)(3)(C), (d)(4)(D), (e)(2), and (e)(3) of (g) innovative linkage and DOL may elect to exercise its option WIA. These encompass basic cores, collaboration between employers and to extend these grants for an additional more intensive, and training activities the local Workforce Investment Board one (1) or two (2) years of operation, along with supportive services. The (WIB) and/or One-Stop/Career Center based on the availability of latter may be provided when they are system to ensure a steady supply of demonstration funding under the necessary to enable an individual who targeted workers. Workforce Investment Act, successful is eligible for training, but cannot afford The above are illustrative examples program operation, and the to pay for such supportive services, to and are not intended to be an exhaustive determination that a grantee’s initial participate in the training program. listing of possible demonstration project program findings could further inform Supportive services are defined in designs or approaches which may the workforce development system Section 101(46) of WIA. (Use ETA’s web achieve the purpose of this solicitation. through refinement of the present site referenced above to view.) demonstration. Grant funds may be used to reimburse C. Coordination employers for extraordinary costs In order to maximize the use of public H. Proposal Submission associated with on-the-job training of resources and avoid duplication of Applicants must submit four (4) program participants, in accordance effort, applicants will coordinate the copies of their proposal with original with the provisions of 20 CFR 663.710. delivery of services under this signatures. The proposal must consist of
VerDate 112000 19:49 Oct 30, 2000 Jkt 194001 PO 00000 Frm 00068 Fmt 4703 Sfmt 4703 E:\FR\FM\31OCN1.SGM pfrm02 PsN: 31OCN1 64994 Federal Register / Vol. 65, No. 211 / Tuesday, October 31, 2000 / Notices two (2) distinct parts, Part I and Part II. shall be included in the technical For each firm to be served, an Part I of the proposal, the financial proposal. authorizing letter should be included in application, shall contain the Standard the proposal’s attachments indicating: Part III. Statement of Work Form SF–424, ‘‘Application for Federal (1) The skill area(s) of the firm’s current Assistance’’ (Appendix A) and the Each technical proposal must follow shortage, (2) the duration of the Budget Information Sheet (Appendix B). the format outlined here. As noted in shortage, (3) the magnitude of the The Federal Domestic Assistance Part IV, each criterion on which shortage as reflected in the current and, Catalog number is 17.246. Applicants proposals will be rated relates to if applicable, projected number of: (a) shall indicate on the SF–424 the specific sections of this Part against Unfilled job openings and/or (b) organization’s IRS status, if applicable. which the criterion will be applied. encumbered positions for which According to the Lobbying Disclosure Failure to provide the information employees lack needed knowledge of Act of 1995, section 18, an organization requested in the specific section the identified skill area, (4) plans for described in section 501(c)(4) of the prescribed in this Part will result in a utilizing successful training completers, Internal Revenue Code of 1986 which reduced rating of the evaluation and (5) a commitment to adhere to the engages in lobbying activities shall not criterion(a) to which that section wage requirements for successful be eligible for the receipt of federal applies. For every section, A through F, training completers as provided in Part funds constituting an award, grant, or the application should include: (1) II.D. loan. The individual signing the SF–424 Information that responds to the C. Targeted Workers on behalf of the applicant must requirements in this Part; (2) represent the responsible financial and information that indicates adherence to Identify the targeted workers who will administrative entity for a grant should the provisions described in Parts I and receive the training and other services to that application result in an award. II of this solicitation; and (3) other be provided through this project. The budget must include on separate information the offerors believe will Indicate the number to be trained for pages detailed breakouts of each address the rating criteria identified in each firm identified in section B above proposed budget line item found in the Part IV. and whether they will be incumbent budget information sheet including Information required under B and C workers of the firm and/or recruited detailed administrative costs. The below shall be provided separately for dislocated workers. For incumbent Salaries line item shall be used to each labor market area where incumbent workers, discuss the types of positions document the project staffing plan by and dislocated workers will be served. these employees currently occupy, and, providing a detailed listing of each staff To the extent that the project design if training is voluntary, the availability position providing more than .05 FTE differs for different geographic areas, of a sufficient number of workers. For support to the project, by annual salary, information required under section D dislocated workers, provide evidence number of months assigned to below shall be provided for each that sufficient numbers of dislocated demonstration responsibilities, and FTE geographic area. workers with appropriate backgrounds percentage to be charged to the grant. In will be available for training and addition, for the Contractual line item, A. Project Purpose placement with participating firms. each planned contract and the amount Describe the specific purpose or Describe the process to be used in of the contract shall be listed. For each purposes of the proposed project. documenting the incumbent or budget line item that includes funds or dislocated workers’ status of the project B. Skill/Occupational/Industrial in-kind contributions from a source participants consistent with the Shortage Areas other than the requested grant funds, the requirements in Part II.A. source, the amount, and in-kind Identify those skills/occupational/ D. Services contributions, including any restrictions industrial shortage areas to be addressed that may apply to these funds, shall be by the project. Such areas must be one Describe the strategy and service identified. Costs associated with the or more of those identified in Part I.B components to be applied in addressing development of curriculum and other above. The identity and geographic the skill/occupational/ industrial one-time costs should be noted locations of those firms which currently shortages identified in section B above. separately in order for reviewers to have these shortages and which will be (Note: the services to be provided must identify costs associated with targeted for assistance under this project be consistent with the provisions of Part development and start-up as well as must be provided. Corroborating II.B.) Insert a brief chart of the ongoing participant costs. In addition, evidence (footnote sources) also should sequencing of the services to be the budget shall provide sufficient funds be presented, based on local or regional provided. Include in this discussion for four persons’ trips to meetings in data and information, of the current detail regarding the service components Washington, D.C. and other locations. existence of the identified shortages in identified below and any additional Part II, the technical proposal, shall the given geographic area with respect components proposed: demonstrate the offerors’s capabilities in to both job demand and the lack of • Recruitment/outreach—depending accordance with the Statement of Work qualified job applicants. on which type(s) of workers will be in Part III of this solicitation. The Note: Information from the Bureau of Labor assisted by this project, indicate how technical proposal shall be limited to Statistics (BLS), available through a variety of incumbent workers will be recruited thirty (30) double-spaced, single-side, web sites including BLS, O*NET and within the participating firms and/or 8.5-inch x 11-inch pages with 1-inch America’s Labor Market Information System how dislocated workers in the local/ margins. An Executive Summary not to (ALMIS), should be considered as a key regional area(s) served will be recruited. exceed two pages must be included and source of documentation. In addition, State Briefly describe any recruitment Occupational Information Coordinating will be counted within the 30 page materials to be developed. Committee (SOICC) and local WIB job • limits. Attachments shall not exceed training plans may also be considered. Other Training—its general content, twenty (20) pages including the required sources from the private sector such as duration, and methods of instruction. Appendices A–D listed at the end of this Chamber of Commerce or local Technology Indicate whether the curriculum to be SGA. Text type shall be 11 point or Council surveys as well as university studies used is ready for use, will need to be larger. No cost data or reference to price are also acceptable. adapted from an existing version, or will
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Provide a project that the shortages identified by the firms Discuss the suitability of the training in organizational chart identifying the also exist more generally in the local/ regard to the backgrounds and positions and their relationships to each regional areas where the target firms are experience of the targeted workers other. Include an explanation of this located. Credible information is described in section C above. staffing in relation to the project’s presented to demonstrate that there are • Supportive services—describe each purpose, services, and performance incumbent and dislocated workers who and the circumstances under which goals. are available to participate in training in they would be provided. Include, if applicable, a description of sufficient numbers and with appropriate • Placement—describe the process to any industry-led consortium/Employer backgrounds to alleviate the shortages be used once training is completed for Advisory Board (existing or specially identified in participating firms. placing dislocated workers into the skill formed for this project) that will provide (Relates to information requested in Part shortage jobs identified in participating guidance to this project. Describe the III, sections B and C.) firms and how a firm’s incumbent consortium’s role in this effort and its workers will be placed in either new membership. B. Service Provision (25 points) jobs or their new skills will be utilized Describe the connection between this The services planned are appropriate, in their existing positions. project and the local Workforce suitable, and responsive to: (1) The need • Post-placement services—if Investment Board(s) in the local areas in for reducing the shortages identified applicable, describe such services and which the firms to be served are located through the successful recruitment, the circumstances under which they with particular reference to: (1) The training, support, and placement of would be provided. coordination of services to be provided incumbent and dislocated workers and With reference to the service worker participants (see Part II.C.) and (2) the backgrounds and experience of components to be utilized, describe the (2) if applicable, the relationship of the those workers who are to be served. A coordination of services to be industry-led consortium/Employer high degree of coordination with other undertaken. This description must Advisory Board with the local WIB(s) in public and private programs will occur include the requirements referenced in regard to strategy planning and policy in order to maximize the use of other Part II.C. In addition, if applicable, efforts (see Part I.B.). Include as an public services and resources and to describe any parallel efforts by attachment a letter(s) from the local avoid duplicative efforts. (Relates to participating firms to address their skill WIB(s) indicating its commitments to information requested in Part III, section shortages in conjunction with the working with this project, if funded. D.) training being provided. Part IV. Rating Criteria and Award C. Performance Goals and Measures (15 E. Performance Goals, Measures, and Selection Process points) Outcomes A careful evaluation of applications The justifications cited for the Describe the performance goals to be will be made by a technical review performance goals proposed show a met by this project, the justification of panel who will evaluate the clear and logical relationship between the goals set, and the performance applications against the criteria listed in the goals and the solicitation’s measures to be used in assessing the the SGA. The panel results will be identified outcomes and any other attainment of those goals in regard to advisory in nature and not binding on outcomes proposed. The proposed the following outcomes: the Grant Officer. The Government may performance measures to determine the • The reduction of identified elect to award grants with or without extent to which the performance goals shortages in participating firms as a discussions with the offerors. In will be met are also appropriate for the result of the training/services provided situations without discussions, an task. (Relates to information requested • The effect of reduced shortages on award will be based on the offerors’s in Part III, section E.) one or more dimensions of the signature on the Standard Form SF–424, participating firms’ performance, e.g., which constitutes a binding offer. The D. Project Management (15 points) productivity, sales, profitability, on time Grant Officer will make final award The proposed staffing with regard to deliveries decisions based upon what is most the number, types of positions, duties, • The effect on participating workers advantageous to the Federal associated full-time equivalents (FTE’s), including skill gains, utilization of the Government in terms of technical and staff relationships are clearly new skills learned, wages, wage gains, quality, responsiveness to this presented. The explanation provided of and job satisfaction. solicitation (including goals of the the staffing in regard to the project’s Note: in setting goals for wages, the wages Department to be accomplished by this purpose, services, and performance for training completers must meet the solicitation), geographical balance, and goals shows a clear, logical, and requirements of Part II.D. other factors. reasonable relationship. There is an Projects may also include other Panelists shall evaluate proposals for explicit commitment by the local WIB(s) performance goals and measures for acceptability based upon overall to participate in this project. (Relates to other outcomes as applicable. responsiveness in accordance with the information requested in Part III, section factors below. F.) F. Staffing and Organization Describe staffing for the project A. Documented Shortages and Available E. Cost-Effectiveness (20 points) including the numbers and types of Workers (25 points) The cost effectiveness of the project is positions and associated full-time Documentation is presented from reasonable and optimal as indicated by equivalents (FTE’s), along with very those firms targeted for assistance the relationship of proposed costs to the
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[FR Doc. 00–27930 Filed 10–30–00; 8:45 am] BILLING CODE 4510±30±C
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DEPARTMENT OF LABOR http://www.osha.gov. containing products and to containers SUPPLEMENTARY INFORMATION holding such products. Additional Occupational Safety and Health provisions that contain paperwork Administration I. Background requirements include: Developing [Docket No. ICR±1218±0133(2001)] The Department of Labor, as part of its specific information and training continuing effort to reduce paperwork programs for employees; using Asbestos in General Industry and respondent burden, conducts a information, data, and analyses to Standard; Extension of the Office of preclearance consultation program to demonstrate that PACM does not Management of Budget's Approval of provide the general public and Federal contain asbestos; providing medical Information-Collection (Paperwork) agencies with an opportunity to surveillance for employees potentially Requirements comment on proposed and continuing exposed to ACMs and/or PACMs, information-collection requirements in including administering an employee AGENCY: Occupational Safety and Health accordance with the Paperwork medical questionnaire, providing Administration (OSHA), Labor. Reduction Act of 1995 (PRA–95) (44 information to the examining physician, ACTION: Notice of an opportunity for U.S.C. 3506(c)(2)(A)). This program and providing the physician’s written public comment. ensures that information is in the opinion to the employee; maintaining desired format, reporting burden (time SUMMARY: OSHA solicits public exposure-monitoring records, objective and costs) is minimal, collection comment concerning its request for an data used for exposure determinations, instruments are clearly understood, and extension of the information-collection and medical-surveillance; making OSHA’s estimate of the information requirements contained in its Asbestos specified records (e.g., exposure- burden is correct. The Occupational in General Industry Standard at 29 CFR monitoring and medical-surveillance Safety and Health Act of 1970 (the 1910.1001 (the ‘‘Standard’’). records) available to designated parties; Request for Comment: The Agency ‘‘Act’’) authorizes information collection and transferring exposure-monitoring has a particular interest in comments on by employers as necessary or and medical-surveillance records to the the following issues: appropriate for enforcement of the Act National Institute for Occupational • Whether the information-collection or for developing information regarding Safety and Health on cessation of requirements are necessary for the the causes and prevention of business. proper performance of the Agency’s occupational injuries, illnesses, and These paperwork requirements permit functions, including whether the accidents (29 U.S.C. 657). employers, employees and their The basic purpose of the information- information is useful; designated representatives, OSHA, and • The accuracy of the Agency’s collection requirements in the Standard other specified parties to determine the estimate of the burden (time and costs) is to provide employees with effectiveness of an employer’s asbestos- information necessary for them to of the information-collection control program. Accordingly, the determine that they are receiving the requirements, including the validity of requirements ensure that employees required protection from hazardous the methodology and assumptions used; exposed to asbestos receive all of the asbestos exposure. Asbestos exposure • The quality, utility, and clarity of protection afforded by the Standard. the information collected; and results in asbestosis, an emphysema-like • Ways to minimize the burden on condition; mesothelioma; and II. Proposed Actions employers who must comply; for gastrointestinal cancer. OSHA proposes to extend the Office Several provisions of the Standard example, by using automated or other of Management and Budget’s (OMB) specify paperwork requirements, technological information-collection approval of the collection-of- and -transmission techniques. including: Implementing an exposure monitoring program that notifies information (paperwork) requirements DATES: Submit written comments on or employees of their exposure-monitoring contained in the Standard. The Agency before January 2, 2001. results; establishing a written will summarize the comments ADDRESSES: Submit written comments compliance program; and informing submitted in response to this notice, to the Docket Office, Docket No. ICR– laundry personnel of the requirement to and will include this summary in its 1218–0133(2001), OSHA, U.S. prevent release of airborne asbestos request to OMB to extend the approval Department of Labor, Room N–2625, above the time-weighted average and of these information-collection 200 Constitution Avenue, NW., excursion limit. Other provisions requirements. Washington, DC 20210; telephone: (202) associated with paperwork requirements Type of Review: Extension of 693–2350. Commenters may transmit include: Maintaining records of currently approved information- written comments of 10 pages or less in information obtained concerning the collection requirements. length by facsimile to (202) 693–1648. presence, location, and quantity of Title: Asbestos in General Industry (29 FOR FURTHER INFORMATION CONTACT: asbestos-containing materials (ACMs) CFR 1910.1001). Todd R. Owen, Directorate of Policy, and/or presumed asbestos-containing OMB Number: 1218–0133. OSHA, U.S. Department of Labor, Room materials (PACMs) in a building/facility; Affected Public: Business or other for- N–3641, 200 Constitution Avenue, NW., notifying housekeeping employees of profit organizations; Federal, State, Washington, DC 20210; telephone: (202) the presence and location of ACMs and Local, or Tribal governments. 693–2444. A copy of the Agency’s PACMs in areas they may contact Number of Respondents: 233. Information-Collection Request (ICR) during their work; posting warning Frequency: On occasion. supporting the need for the information- signs demarcating regulated areas; Average Time per Response: Varies collection requirements specified by the posting signs in mechanical rooms/areas from 5 minutes to maintain records to Standard is available for inspection and that employees may enter and that 1.5 hours for employee training or copying in the Docket Office, or you contain ACMs and PACMs, informing medical evaluation. may request a mailed copy by them of the identity and location of Estimated Total Burden Hours: telephoning Todd Owen at (202) 693– these materials and work practices that 35,523. 2444. For electronic copies of this ICR, prevent disturbing the materials; and Estimated Cost (Operation and contact OSHA on the Internet at affixing warning labels to asbestos- Maintenance): $1,625,143.
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III. Authority and Signature written comments of 10 pages or less in the requirements that pertain to Charles N. Jeffress, Assistant Secretary length by facsimile to (202) 693–1648. regulated areas, and the measures they of Labor for Occupational Safety and FOR FURTHER INFORMATION CONTACT: can use to protect their employees from Health, directed the preparation of this Todd R. Owen, Directorate of Policy, asbestos overexposure. Other provisions notice. The authority for this notice is OSHA, U.S. Department of Labor, Room associated with paperwork requirements the Paperwork Reduction Act of 1995 N–3641, 200 Constitution Avenue, NW., include: Evaluating and certifying (44 U.S.C. 3506) and Secretary of Washington, DC 20210; telephone: (202) alternative control methods for Class I Labor’s Order No. 3–2000 (65 FR 693–2444. A copy of the Agency’s and Class II asbestos work and, for Class 50017). Information-Collection Request (ICR) I asbestos work, a requirement to send supporting the need for the information- a copy of the evaluation and Signed at Washington, DC on October 26, certification to the OSHA national 2000. collection requirements specified by the Standard is available for inspection and office; 1 informing laundry personnel of Charles N. Jeffress, copying in the Docket Office, or you the requirement to prevent release of Assistant Secretary of Labor. may request a mailed copy by airborne asbestos above the time- [FR Doc. 00–27921 Filed 10–30–00; 8:45 am] telephoning Todd Owen at (202) 693– weighted average and excursion limit; BILLING CODE 4510±26±U 2444. For electronic copies of this ICR, notification by employers and building/ contact OSHA on the Internet at facility owners of designated personnel http://www.osha.gov. and employees regarding the presence, DEPARTMENT OF LABOR location, and quantity of ACMs and/or SUPPLEMENTARY INFORMATION: PACMs; using information, data, and Occupational Safety and Health I. Background analyses to demonstrate that PACM Administration The Department of Labor, as part of its does not contain asbestos; posting signs in mechanical rooms/areas that [Docket No. ICR±1218±0195(2001)] continuing effort to reduce paperwork employees may enter and that contain and respondent burden, conducts a Asbestos in Shipyards Standard; ACMs and PACMs, informing them of preclearance consultation program to Extension of the Office of Management the identity and location of these provide the general public and Federal and Budget's Approval of Information- materials and work practices that agencies with an opportunity to Collection (Paperwork) Requirements prevent disturbing the materials; posting comment on proposed and continuing warning signs demarcating regulated AGENCY information-collection requirements in : Occupational Safety and Health areas; and affixing warning labels to accordance with the Paperwork Administration (OSHA), Labor. asbestos-containing products and to Reduction Act of 1995 (PRA–95) (44 ACTION: Notice of an opportunity for containers holding such products. public comment. U.S.C. 3506(c)(2)(A)). This program Additional provisions of the Standard ensures that information is in the that contain paperwork requirements SUMMARY: OSHA solicits public desired format, reporting burden (time comment concerning its request for an include: Developing specific and costs) is minimal, collection information and training programs for extension of the information-collection instruments are clearly understood, and requirements contained in its Asbestos employees; providing medical OSHA’s estimate of the information surveillance for employees potentially in Shipyard Standard at 29 CFR burden is correct. The Occupational exposed to ACMs and/or PACMs, 1915.1001 (the ‘‘Standard’’). Safety and Health Act of 1970 (the including administering an employee REQUEST FOR COMMENT: The Agency has ‘‘Act’’) authorizes information collection medical questionnaire, providing a particular interest in comments on the by employers as necessary or information to the examining physician, following issues: appropriate for enforcement of the Act • and providing the physician’s written Whether the information-collection or for developing information regarding opinion to the employee; maintaining requirements are necessary for the the causes and prevention of records of objective data used for proper performance of the Agency’s occupational injuries, illnesses, and exposure determinations, employee functions, including whether the accidents (29 U.S.C. 657). exposure-monitoring and medical- information is useful; The basic purpose of the information- • surveillance records, training records, The accuracy of the Agency’s collection requirements in the Standard the record (i.e., information, data, and estimate of the burden (time and costs) is to provide employees with analyses) used to demonstrate that of the information-collection information necessary for them to PACM does not contain asbestos, and requirements, including the validity of determine that they are receiving the notifications made and received by the methodology and assumptions used; required protection from hazardous building/facility owners regarding the • The quality, utility, and clarity of asbestos exposure. Asbestos exposure content of ACMs and PACMs; making the information collected; and results in asbestosis, an emphysema-like specified records (e.g., exposure- • Ways to minimize the burden on condition; mesothelioma; and monitoring and medical-surveillance employers who must comply; for gastrointestinal cancer. records) available to designated parties; example, by using automated or other Several provisions of the Standard and transferring exposure-monitoring technological information-collection specify paperwork requirements, and medical-surveillance records to the and -transmission techniques. including: Implementing an exposure- DATES: Submit written comments on or monitoring program that informs 1 Class I asbestos work involves removing: before January 2, 2001. employees of their exposure-monitoring Thermal-system insulation (i.e., ACM applied to ADDRESSES: Submit written comments results; and, at multi-employer pipes, fittings, boilers, breeching, tanks, ducts or other structural components used to prevent heat to the Docket Office, Docket No. ICR– worksites, notification of other onsite loss or gain.) and surfacing ACMs and PACMs. 1218–0195(2001), OSHA, U.S. employers by employers establishing Class II asbestos work involves removing ACM that Department of Labor, Room N–2625, regulated areas of the type of work is not thermal-system insulation or surfacing 200 Constitution Avenue, NW., performed with asbestos-containing material. Such material includes, but is not limited to, asbestos-containing wallboard, floor tile and Washington, DC 20210; telephone: (202) materials (ACMs) and/or presumed sheeting, roofing and siding shingles, and 693–2350. Commenters may transmit asbestos-containing materials (PACMs), construction mastics.
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National Institute for Occupational DEPARTMENT OF LABOR SUPPLEMENTARY INFORMATION: Safety and Health on cessation of I. Background business. Occupational Safety and Health Administration The Department of Labor, as part of its These paperwork requirements permit continuing effort to reduce paperwork [Docket No. ICR±1218±0134 (2001)] employers, employees and their and respondent burden, conducts a designated representatives, OSHA, and Asbestos in Construction Standard; preclearance consultation program to other specified parties to determine the Extension of the Office of Management provide the general public and Federal effectiveness of an employer’s asbestos- and Budget's Approval of Information- agencies with an opportunity to control program. Accordingly, the Collection (Paperwork) Requirements comment on proposed and continuing requirements ensure that employees information-collection requirements in exposed to asbestos receive all of the AGENCY: Occupational Safety and Health accordance with the Paperwork protection afforded by the Standard. Administration (OSHA), Labor. Reduction Act of 1995 (PRA–95) (44 ACTION: Notice of an opportunity for U.S.C. 3506(c)(2)(A)). This program II. Proposed Actions public comment. ensures that information is in the OSHA proposes to extend the Office desired format, reporting burden (time SUMMARY: OSHA solicits public and costs) is minimal, collection of Management and Budget’s (OMB) comment concerning its request for an approval of the collection-of- instruments are clearly understood, and extension of the information-collection OSHA’s estimate of the information information (paperwork) requirements requirements contained in its Asbestos burden is correct. The Occupational contained in the Standard. The Agency in Construction Standard at 29 CFR Safety and Health Act of 1970 (the will summarize the comments 1926.1101 (the ‘‘Standard’’). ‘‘Act’’) authorizes information collection Request for Comment: The Agency submitted in response to this notice, by employers as necessary or has a particular interest in comments on and will include this summary in its appropriate for enforcement of the Act request to OMB to extend the approval the following issues: • Whether the information-collection or for developing information regarding of these information-collection the causes and prevention of requirements. requirements are necessary for the proper performance of the Agency’s occupational injuries, illnesses, and Type of Review: Extension of functions, including whether the accidents (29 U.S.C. 657). The basic purpose of the information- currently approved information- information is useful; collection requirements. • The accuracy of the Agency’s collection requirements in the Standard estimate of the burden (time and costs) is to provide employees with Title: Asbestos in Shipyards (29 CFR information necessary for them to 1915.1001). of the information-collection requirements, including the validity of determine that they are receiving the OMB Number: 1218–0195. the methodology and assumptions used; required protection from hazardous Affected Public: Business or other for- • The quality, utility, and clarity of asbestos exposure. Asbestos exposure profit organizations; Federal, State, the information collected; and results in asbestosis, an emphysema-like Local, or Tribal governments. • Ways to minimize the burden on condition; mesothelioma; and gastrointestinal cancer. Number of Respondents: 89. employers who must comply; for example, by using automated or other Several provisions of the Standard Frequency: On occasion. technological information-collection specify paperwork requirements, Average Time per Response: Varies and -transmission techniques. including: Implementing an exposure- monitoring program that informs from 5 minutes to maintain records to DATES: Submit written comments on or employees of their exposure-monitoring 17.3 hours for training a competent before January 2, 2001. results; and, at multi-employer person. ADDRESSES: Submit written comments worksites, notification of other onsite Estimated Total Burden Hours: 1,484. to the Docket Office, Docket No. ICR– employers by employers establishing 1218–0134 (2001), OSHA, U.S. Estimated Cost (Operation and regulated areas of the type of work Department of Labor, Room N–2625, Maintenance): $36,497. performed with asbestos-containing 200 Constitution Avenue, NW, materials (ACMs) and/or presumed III. Authority and Signature Washington, DC 20210; telephone: (202) asbestos-containing materials (PACMs), 693–2350. Commenters may transmit the requirements that pertain to Charles N. Jeffress, Assistant Secretary written comments of 10 pages or less in regulated areas, and the measures they of Labor for Occupational Safety and length by facsimile to (202) 693–1648. can use to protect their employees from Health, directed the preparation of this FOR FURTHER INFORMATION CONTACT: asbestos overexposure. Other provisions notice. The authority for this notice is Todd R. Owen, Directorate of Policy, associated with paperwork requirements the Paperwork Reduction Act of 1995 OSHA, U.S. Department of Labor, Room include: Evaluating and certifying (44 U.S.C. 3506) and Secretary of N–3641, 200 Constitution Avenue, NW, alternative control methods for Class I Labor’s Order No. 3–2000 (65 FR Washington, DC 20210; telephone: (202) and Class II asbestos work and, for Class 50017). 693–2444. A copy of the Agency’s I asbestos work, a requirement to send Signed at Washington, DC on October 26, Information-Collection Request (ICR) a copy of the evaluation and 2000. supporting the need for the information- certification to the OSHA national collection requirements specified by the office; 1 informing laundry personnel of Charles N. Jeffress, Standard is available for inspection and Assistant Secretary of Labor. copying in the Docket Office, or you 1 Class I asbestos work involves removing: [FR Doc. 00–27922 Filed 10–30–00; 8:45 am] may request a mailed copy by Thermal-system insulation (i.e., ACM applied to BILLING CODE 4510±26±P telephoning Todd Owen at (202) 693– pipes, fittings, boilers, breeching, tanks, ducts or other structural components used to prevent heat 2444. For electronic copies of this ICR, loss or gain.) and surfacing ACMs and PACMs. contact OSHA on the Internet at http:/ Class II asbestos work involves removing ACM that /www.osha.gov. is not thermal-system insulation or surfacing
VerDate 112000 19:49 Oct 30, 2000 Jkt 194001 PO 00000 Frm 00085 Fmt 4703 Sfmt 4703 E:\FR\FM\31OCN1.SGM pfrm02 PsN: 31OCN1 Federal Register / Vol. 65, No. 211 / Tuesday, October 31, 2000 / Notices 65011 the requirement to prevent release of information (paperwork) requirements Written Comments and Hearing airborne asbestos above the time- contained in the Standard. The Agency Requests weighted average and excursion limit; will summarize the comments All interested persons are invited to notification by employers and building/ submitted in response to this notice, submit written comments or request for facility owners of designated personnel and will include this summary in its a hearing on the pending exemptions, and employees regarding the presence, request to OMB to extend the approval unless otherwise stated in the Notice of location, and quantity of ACMs and/or of these information-collection Proposed Exemption, within 45 days PACMs; using information, data, and requirements. from the date of publication of this analyses to demonstrate that PACM Type of Review: Extension of Federal Register notice. Comments and does not contain asbestos; posting signs currently approved information- requests for a hearing should state: (1) in mechanical rooms/areas that collection requirements. The name, address, and telephone employees may enter and that contain Title: Asbestos in Construction (29 number of the person making the ACMs and PACMs, informing them of CFR 1926.1101). comment or request, and (2) the nature the identity and location of these OMB Number: 1218–0134. of the person’s interest in the exemption materials and work practices that Affected Public: Business or other for- and the manner in which the person prevent disturbing the materials; posting profit organizations; Federal, State, would be adversely affected by the warning signs demarcating regulated Local, or Tribal governments. exemption. A request for a hearing must areas; and affixing warning labels to also state the issues to be addressed and asbestos-containing products and to Number of Respondents: 286,821. include a general description of the containers holding such products. Frequency: On occasion. evidence to be presented at the hearing. Additional provisions of the Standard Average Time per Response: Varies that contain paperwork requirements from 5 minutes to maintain records to ADDRESSES: All written comments and include: Developing specific 17.3 hours for training a competent request for a hearing (at least three information and training programs for person. copies) should be sent to the Pension employees; providing medical Estimated Total Burden Hours: and Welfare Benefits Administration, surveillance for employees potentially 5,817,388. Office of Exemption Determinations, exposed to ACMs and/or PACMs, Estimated Cost (Operation and Room N–5649, U.S. Department of including administering an employee Maintenance): $42,774,491. Labor, 200 Constitution Avenue, NW, medical questionnaire, providing Washington, DC 20210. Attention: information to the examining physician, III. Authority and Signature Application No. lll, stated in each and providing the physician’s written Charles N. Jeffress, Assistant Secretary Notice of Proposed Exemption. The opinion to the employee; maintaining of Labor for Occupational Safety and applications for exemption and the records of objective data used for Health, directed the preparation of this comments received will be available for exposure determinations, employee notice. The authority for this notice is public inspection in the Public exposure-monitoring and medical- the Paperwork Reduction Act of 1995 Documents Room of the Pension and surveillance records, training records, (44 U.S.C. 3506) and Secretary of Welfare Benefits Administration, U.S. the record (i.e., information, data, and Labor’s Order No 3–2000 (65 FR 50017). Department of Labor, Room N–5638, 200 Constitution Avenue, NW, analyses) used to demonstrate that Signed at Washington, DC on October 26, PACM does not contain asbestos, and 2000. Washington, DC 20210. notifications made and received by Charles N. Jeffress, Notice to Interested Persons building/facility owners regarding the Assistant Secretary of Labor. content of ACMs and PACMs; making Notice of the proposed exemptions specified records (e.g., exposure- [FR Doc. 00–27972 Filed 10–30–00; 8:45 am] will be provided to all interested monitoring and medical-surveillance BILLING CODE 4510±20±U persons in the manner agreed upon by records) available to designated parties; the applicant and the Department and transferring exposure-monitoring within 15 days of the date of publication DEPARTMENT OF LABOR and medical-surveillance records to the in the Federal Register. Such notice National Institute for Occupational Pension and Welfare Benefits shall include a copy of the notice of Safety and Health on cessation of Administration proposed exemption as published in the business. Federal Register and shall inform These paperwork requirements permit interested persons of their right to [Application No. D±10771, et al.] employers, employees and their comment and to request a hearing designated representatives, OSHA, and Proposed Exemptions; Care Services (where appropriate). other specified parties to determine the Employees' 401(k) Profit Sharing Plan SUPPLEMENTARY INFORMATION: The effectiveness of an employer’s asbestos- and Trust proposed exemptions were requested in control program. Accordingly, the applications filed pursuant to section requirements ensure that employees AGENCY: Pension and Welfare Benefits 408(a) of the Act and/or section exposed to asbestos receive all of the Administration, Labor. 4975(c)(2) of the Code, and in protection afforded by the Standard. ACTION: Notice of Proposed Exemptions. accordance with procedures set forth in II. Proposed Actions 29 CFR Part 2570, Subpart B (55 FR SUMMARY: This document contains 32836, 32847, August 10, 1990). OSHA proposes to extend the Office notices of pendency before the Effective December 31, 1978, section of Management and Budget’s (OMB) Department of Labor (the Department) of 102 of Reorganization Plan No. 4 of approval of the collection-of- proposed exemptions from certain of the 1978, 5 U.S.C. App. 1 (1996), transferred prohibited transaction restrictions of the the authority of the Secretary of the material. Such material includes, but is not limited to, asbestos-containing wallboard, floor tile and Employee Retirement Income Security Treasury to issue exemptions of the type sheeting, roofing and siding shingles, and Act of 1974 (the Act) and/or the Internal requested to the Secretary of Labor. construction mastics. Revenue Code of 1986 (the Code). Therefore, these notices of proposed
VerDate 112000 19:49 Oct 30, 2000 Jkt 194001 PO 00000 Frm 00086 Fmt 4703 Sfmt 4703 E:\FR\FM\31OCN1.SGM pfrm02 PsN: 31OCN1 65012 Federal Register / Vol. 65, No. 211 / Tuesday, October 31, 2000 / Notices exemption are issued solely by the qualified, independent appraiser at the which have common ownership. As of Department. time of each sale transaction. December 31, 1999, the Plan had 710 The applications contain (d) The terms of the past and participants and aggregate assets of representations with regard to the prospective sales transactions were or approximately $3,306,853. proposed exemptions which are will be no less favorable to the Plan than The Plan provides for participant- summarized below. Interested persons those obtainable in similar transactions directed investments for its 401(k) are referred to the applications on file negotiated at arm’s length with portion. Investment discretion over the with the Department for a complete unrelated parties. profit sharing portion of the Plan is statement of the facts and (e) The Plan did not incur any fees or representations. commissions in connection with the exercised by Warren L. Wolfson, who past sale of the Assets nor will it incur serves as the Plan trustee. Mr. Wolfson Care Services Employees’ 401(k) Profit any fees or commissions expenses with is also a principal of W.L.W., Inc. (the Sharing Plan and Trust (the Plan) respect to the prospective sale of such Employer), which operates a chain of Located in Beachwood, OH; Proposed Assets. six long-term care facilities and an Exemption (f) Within 60 days of the publication, associated management company in [Application No. D–10771] in the Federal Register, of the notice northeast Ohio. The Employer does The Department is considering granting this proposed exemption, Mr. business under trade name ‘‘Care granting an exemption under the Wolfson will file a Form 5330 with the Services Associates.’’ authority of section 408(a) of the Act Internal Revenue Service (the Service) 2. To provide a more cohesive and section 4975(c)(2) of the Code and and pay all appropriate excise taxes that investment policy and reduce overall in accordance with the procedures set may be due and owing with respect to administrative costs to the Plan, the forth in 29 CFR Part 2570, Subpart B (55 prohibited transactions arising in Employer and Mr. Wolfson wished to FR 32836, 32847, August 10, 1990). If connection with certain of the Assets. consolidate the Plan’s investments with the exemption is granted, the Effective Date: If granted, this one investment adviser. The new restrictions of sections 406(a) and proposed exemption will be effective as investment adviser, The Heitner 406(b)(1) and (b)(2) of the Act and the of December 30, 1997 with respect to Corporation (Heitner), advised the the initial sale of the Assets by the Plan sanctions resulting from the application Employer and Mr. Wolfson to dispose of to Mr. Wolfson. In addition, this of section 4975 of the Code, by reason certain of the Plan’s investments proposed exemption will be effective as of section 4975(c)(1)(A) through (E) of inasmuch as Heitner did not desire to of the date of the grant with respect to the Code, shall not apply to the (1) cash hold and manage these Assets.1 The the resale of the Assets by the Plan to sale by the Plan, occurring on December specific Assets targeted by Heitner Mr. Wolfson. 30, 1997, of certain assets (the Assets), included the Plan’s investments in six to Mr. Warren L. Wolfson, a party in Summary of Facts and Representations bonds issued by the Government of interest with respect to the Plan; and (2) 1. The Plan, which was established on Israel (the Israel Bonds), 50 shares of the prospective cash resale of the Assets December 16, 1983, is a defined common stock in River Glen REIT, Inc. by the Plan to Mr. Wolfson. contribution plan covering all eligible (the REIT Interests) and a 1⁄4 limited The proposed exemption is subject to 1 employees of W.W. Extended Care, Inc.; partnership interest (the ⁄4 LP Unit) in the following conditions: Richfield Nursing Center, Inc.; Villa the Apartment Opportunity Fund II, (a) Each sale of the Assets was or will L.P., (the AOF II Partnership ).2 be a one-time transaction for cash. Nursing Corporation; Cleveland Golden (b) The Plan received or will receive Age Hospital, Inc.; Pebble Creek 3. The six Israel Bonds, which are set no less than the fair market value of the Convalescent Center of Ohio, Inc.; forth below in the table, were purchased Assets at the time of each sale. Belcare, Inc.; LTC Remedies, Inc.; by the Plan for cash from an unrelated (c) The sales price for each Asset was Richmond Nursing, Inc.; Wyatt Woods, party between November 1986 and July determined or will be determined by a L.L.C., and WLW, Inc., companies 1997.
Maturity Bond Issuance date Face value Interest rate date
One ...... 11/1/86 ...... $25,000 Variable ...... 11/1/98 Two ...... 11/1/88 ...... 25,000 Variable ...... 11/1/00 Three ...... 11/1/90 ...... 25,000 Variable ...... 3/31/02 Four ...... 11/1/93 ...... 25,000 6.0%, Fixed ...... 9/30/03 Five ...... 10/1/95 ...... 25,000 Variable ...... 1/31/03 Six ...... 7/1/97 ...... 25,000 7.5%, Fixed ...... 5/31/07
The Israel Bonds were acquired by the Five carry (or carried) variable interest percent per annum. Interest has been Plan for their $25,000 face value and rates, based on the average of the prime paid on the Israel Bonds twice per year. have (or had) terms ranging from 8 to 12 rates quoted by Bank of America During 1997, the Plan received interest years. With the exception of Bond One, National Trust & Savings Association, payments on the Israel Bonds of which matured on November 1, 1998, Continental Bank, N.A. and Citibank, $11,109.41. the other Israel Bonds are still in N.A. Bonds Four and Six bear fixed 4. On July 25, 1997, the Plan acquired existence. Bonds One, Two, Three and interest rates of 6 percent and 7.5 25 shares of common stock comprising
1 In a letter dated May 17, 2000, Mr. Larry Flynn, Flynn explained that both he and Mr. Wolfson said he advised Mr. Wolfson to sell the subject Vice President and Financial Consultant of considered many third party administrators for the Assets and reallocate the Plan’s assets into mutual Huntleigh Financial Services, Inc. of St. Louis, Plan. However, none of the prospective candidates funds. Missouri, and a former employee of Heitner, stated expressed an interest in holding the Assets on 2 It is represented that Mr. Wolfson did not invest that he advised Mr. Wolfson regarding the behalf of the Plan because the investments could in any of the aforementioned Assets in his personal reallocation of the Plan’s assets during 1997. Mr. not be priced on a daily basis. Therefore, Mr. Flynn capacity.
VerDate 112000 21:27 Oct 30, 2000 Jkt 194001 PO 00000 Frm 00087 Fmt 4703 Sfmt 4703 E:\FR\FM\31OCN1.SGM pfrm02 PsN: 31OCN1 Federal Register / Vol. 65, No. 211 / Tuesday, October 31, 2000 / Notices 65013 the REIT Interests from River Glen REIT, secondary market for these Assets, Mr. established a $2,500 account receivable, Inc. (River Glen REIT), an unrelated Wolfson sought the advice of his which was to be owed to the Plan by party, for $25,000. On September 11, accountant, who purportedly advised Mr. Wolfson. The auditors also 1997, the Plan acquired an additional 25 him to purchase the Assets, in his recommended that the receivable carry shares comprising the REIT Interests individual capacity, at their fair market an interest rate of 10 percent per annum from River Glen REIT for $25,000. The value. from the time of the December 30, 1997 Plan paid the consideration in cash. The The fair market value of each of the sale transaction. No other loan terms REIT Interests are assignable only with Assets was determined by the entities were negotiated by the Plan and Mr. the consent of River Glen REIT. from which they had been acquired. Wolfson. No promissory note was ever The seller, River Glen REIT, is a With respect to the Israel Bonds, the fair executed and the loan amount was Virginia corporation that qualifies as a market value of such instruments was unsecured. real estate investment trust for federal deemed to be equal to their face value 8. Also in December 1998, the Plan’s income tax purposes. River Glen REIT by Ms. Evelyn Epstein of the State of auditors were advised by their legal owns a 99 percent limited partnership Israel Bond Office in Cleveland, Ohio. counsel that the December 1997 sale interest in River Glen of Orlando In a verbal consultation with Mr. had resulted in a prohibited transaction Partners, Ltd. (the River Glen Wolfson, Ms. Epstein placed the in violation of the Act. In order to Partnership), which, in turn, owns a 396 aggregate fair market value of the Israel ‘‘correct’’ the prohibited transaction, residential unit located in Orlando, Bonds at $150,000 as of December 30, counsel advised the auditors to resell Florida. In addition, River Glen REIT 1997. the Assets to the Plan for their fair has 5,800 shares of common stock In addition, by letter dated December market value. Accordingly, on authorized and outstanding with a par 16, 1997, William J. Gordon, President December 31, 1998, Mr. Wolfson sold all value of $1,000 per share. of River Glen REIT, advised Mr. of the previously purchased Assets back During 1997, the Plan received no Wolfson that the fair market value of to the Plan at what was believed to be distributions with respect to the REIT River Glen REIT common stock was no more than the fair market value of Interests. $1,000 per share as of that date. such Assets.4 The receivable owed to 5. On February 24, 1997, the Plan Therefore, Mr. Gordon placed the total the Plan was also canceled. Further, Mr. 1 value of the Plan’s River Glen REIT purchased the ⁄4 LP Unit in the AOF II Wolfson made a total restoration Partnership, from General Capital Interests at $50,000. payment to the Plan of $18,290.56. Of Further, on December 22, 1997, Corporation, an unrelated party, for a this amount, $2,000.00 represented a Maclin Davis, III, Controller/Secretary of cash purchase price of $25,000. The distribution from the AOF II the General Partner, informed Mr. AOF II Partnership is a Tennessee Partnership, $4,269.00 represented a Wolfson, in writing, that because there limited partnership which was dividend on the REIT Interests, $819.00 were no secondary market transactions organized on January 10, 1996 for the represented a non-taxable distribution in the AOF II Partnership interests, the purpose of owning and operating attributed to the REIT Interests, best measure of the fair market value of apartment complexes located in Florida $9,312.50 represented interest derived the 1⁄4 LP Unit was its original cost of and Tennessee. The general partner (the $22,500. from the Israel Bonds, for a subtotal of General Partner) of the AOF II Based upon the aforementioned $16,400.50. Of the subtotal, Mr. Wolfson Partnership is General Capital valuations of the Assets, Mr. Wolfson made a 10 percent interest payment to Associates II, L.P., an affiliate of General obtained the requisite consents from the the Plan in the amount of $1,640.06. In Capital Corporation. The AOF II issuers and individually purchased all addition, Mr. Wolfson made a cash Partnership makes quarterly of the Israel Bonds, the REIT Interests payment to the Plan of $250, reflecting distributions to investors at an annual a 10 percent interest factor on the and the 1⁄4 LP Unit from the Plan at their rate of 8 percent and anticipates selling 5 respective fair market values on receivable for its one year duration. or refinancing its underlying December 30, 1997 for a total cash Between January 1999 and August investments within 4 to 7 years after purchase price of $222,500. The Plan 2000, the Plan has received additional acquisition. Sales of AOF II Partnership paid no fees or commissions in income with respect to the subject interests, such as the 1 4 ⁄ LP Unit, require connection with the sale. In January Assets. In regard to the Israel Bonds and the approval of the General Partner. 1998, all of the remaining assets were the REIT Interests, the Plan has received During 1997, the Plan received a transferred to Heitner for investment total interest payments and distributions distribution of $1,086 from the AOF II of $23,953 and $7,176, respectively. In 1 management. Partnership with respect to the ⁄4 LP 7. In December 1998, the Plan’s Unit. auditors discovered a $2,500 shortfall in 4 The Department has no jurisdiction with respect 6. Because the subject Assets are not the purchase price Mr. Wolfson had to section 53.491(e)–(c)(1) of the Foundation Excise Tax Regulations (the FETR). This provision applies publicly-traded, Mr. Wolfson, as Plan paid for the Assets. The discrepancy trustee, attempted to locate prospective to prohibited transactions under section 4975 of the was attributed solely to the 1⁄4 LP Unit Code by reason of Temporary Pension Excise Tax purchasers. In this regard, Mr. Wolfson for which Mr. Wolfson had erroneously Regulation 141.4975–13. Under section 53.4941(e)– contacted the sellers from whom the paid $2,500 less than its fair market 1(c)(1) of the FETR, any correction pursuant to Code section 4941 is not an act of self-dealing. Similarly, Assets were purchased to determine value through no fault of his own. The whether there was a secondary market. 3 the Department has determined that the correction problem stemmed from Mr. Davis’s of a prior prohibited transaction is not a prohibited Upon learning that there was no December 22, 1997 letter to Mr. Wolfson transaction under section 406 of the Act. Therefore, in which Mr. Davis had mistakenly the Department expresses no opinion herein on 3 whether the return of the Assets by Mr. Wolfson to Specifically, Mr. Wolfson attempted to sell. the 1 Israel Bonds to several business acquaintances. noted that the ⁄4 LP Unit’s original cost the Plan was a proper correction. However, these persons did not wish to purchase was $22,500. This amount actually 5 Specifically, the Plan repurchased the Israel the Israel Bonds at that time due to their cost. With reflected the adjusted income tax basis Bonds for $150,000, the REIT Interests for $50,000 respect to the REIT Interests and the 1⁄4 LP Unit, Mr. and the 1⁄4 LP Unit for $22,500, for a total for the 1⁄4 LP Unit rather than its true Wolfson was informed by officials at River Glen reacquisition price of $222,500. Along with the REIT and General Capital Corporation, respectively, original cost of $25,000. $18,290.56 total restoration payment made by Mr. that there was no buyers available to acquire these Therefore, in an effort to resolve the Wolfson, the Plan received a total payback of Assets. pricing error, the Plan’s auditors $240,790.56 with respect to the subject Assets.
VerDate 112000 19:49 Oct 30, 2000 Jkt 194001 PO 00000 Frm 00088 Fmt 4703 Sfmt 4703 E:\FR\FM\31OCN1.SGM pfrm02 PsN: 31OCN1 65014 Federal Register / Vol. 65, No. 211 / Tuesday, October 31, 2000 / Notices regard to the 1⁄4 LP Unit, the Plan has value for the Assets as determined by a River Glen REIT, adjusted for the received a total distribution of $11,457. qualified, independent appraiser. The accumulated depreciation of Heather 9. Mr. Wolfson believes that the Plan will not be required to pay any fees Glen, would reflect the fair market value safeguards necessary for the granting of or commissions in connection with the of River Glen REIT as of April 15, 2000. a prospective exemption were present at resale of the Assets. Based on the fact that management the time the original sale transaction 11. Donald C. May, CPA/ABV, CVA, had been able to raise rents and was consummated. It is represented that a qualified, independent appraiser occupancy for the property and the local Mr. Wolfson acted in good faith and affiliated with the accounting firm of economy had remained strong, Mr. May took reasonable and appropriate steps to Howard Wershable & Co. of Cleveland, stated that the fair market value of the protect the Plan from abuse and Ohio has valued the Assets for purposes underlying property would at least be unnecessary risks by restoring the of their potential resale. Following is a equal to its original cost. Although Assets to the Plan, returning all income discussion of Mr. May’s valuations of financial information was only available and distributions he had received and each of the subject Assets. through December 31, 1999, Mr. May making interest payments upon (a) Israel Bonds. In an appraisal report observed that there were no events discovery that the transaction was dated June 5, 2000, Mr. May valued the which would significantly affect the prohibited. In addition, Mr. Wolfson Israel Bonds as of April 15, 2000. With value of the underlying property and represents that at no time was he aware respect to Bonds Two, Three and Five, require adjustments to other assets or that he was engaging in a prohibited Mr. May concluded that the $25,000 liabilities. Therefore, Mr. May placed transaction. face value of these Israel Bonds would the fair market value of the REIT In this regard, the Department notes be indicative of their fair market value Interests at $57,500 (or $1,150 per share) that there was no contemporaneous, as of April 15, 2000. He also noted that as of April 15, 2000. written valuation for the Plan’s sale of Bond One, which matured on November (c) The 1⁄4 LP Unit. In an appraisal the Israel Bonds to Mr. Wolfson. 1, 1998, was redeemed for its $25,000 report dated May 15, 2000, Mr. May also Instead, Mr. Wolfson relied upon the face value. noted that the fair market value of a real oral valuation of Ms. Epstein to With respect to Bond Four, Mr. May estate partnership unit should be establish the fair market value of the noted that as of April 15, 2000, rates on determined by the value of the Israel Bonds. In addition, with respect U.S. Treasury Notes having terms that underlying properties in the to the Plan’s acquisition and holding of were similar to the remaining term on partnership. Because the AOF II the $2,500 account receivable, the terms Bond Four increased to 6.21 percent. Partnership properties had been of this arrangement did not appear to Therefore, he placed the fair market acquired in recent years, Mr. May reflect arm’s length dealings between value of Bond Four at $23,028 as of asserted that the book value of such the parties since the loan was never April 15, 2000. properties, with an adjustment for collateralized, and there was no With respect to Bond Six, Mr. May accumulated depreciation, would independent fiduciary to protect the observed that as of April 15, 2000, the reasonably reflect the value of such interests of the Plan and its participants rate on U.S. Treasury Notes having properties as of April 15, 2000. and beneficiaries. terms similar to the remaining term of Based on the fact that management Due to the absence of adequate Bond Six was 6.16 percent. Because had been able to raise rents and independent safeguards necessary for overall market interest rates had fallen occupancy for most of the properties the granting of an administrative since Bond Six’s acquisition on July 1, and the local economies had remained exemption in both instances, the 1997, he projected the fair market value stable or increased, Mr. May stated that Department has decided not to provide of Bond Six, which carries a 7.5 percent the fair market value of the underlying exemptive relief for these transactions. fixed rate, to be $26,178 as of April 15, properties was at least equal to their Therefore, Mr. Wolfson represents that 2000. original acquisition costs. Although at within sixty days of the publication, in In summary, the fair market values of the time of his appraisal, Mr. May stated the Federal Register, of the notice each of the Israel Bonds, as determined that financial information was available granting this proposed exemption, he by Mr. May, are reflected in the through December 31, 1999, he noted will file a Form 5330 with the Service following table: that no events had taken place that and pay all appropriate excise taxes that would significantly affect the value of are due and owing with respect to the Fair market the 1⁄4 LP Unit and require adjustments Plan’s sale of the Israel Bonds and the Bond Face value value as of extension of credit transaction. 4/15/00 to other assets or liabilities. Therefore, 10. Aside from the retroactive as of April 15, 2000, Mr. May placed the 1 exemption request involving the sale by One ...... $25,000 Matured fair market value of the ⁄4 LP Unit at the Plan to Mr. Wolfson of the REIT Two ...... 25,000 $25,000 $25,000. He also noted that there had Three ...... 25,000 25,000 been no recent sales of AOF II Interests and the 1⁄4 LP Unit, Mr. Four ...... 25,000 23,028 Wolfson is also seeking a prospective Partnership units. Five ...... 25,000 25,000 12. Thus, based upon Mr. May’s exemption from the Department which, Six ...... 25,000 26,178 if granted, will allow the Plan to resell valuations of the Assets as of April 15, the Assets to him, in his personal Total ...... 124,206 2000, Mr. Wolfson proposes to purchase capacity. It is represented that the the five remaining Israel Bonds from the (b) REIT Interests. In an appraisal Plan for $124,206, the REIT Interests for prospective exemption will simplify 1 Plan administration, reduce report dated May 17, 2000, Mr. May $57,500 and the ⁄4 LP Unit for $25,000, recordkeeping costs, and ensure that the stated that the fair market value of a which reflects the fair market value of REIT unit should be determined by the such Assets. The aggregate purchase Plan receives a return on the Assets in 6 excess of its original investment, and value of the properties underlying the price of $206,706 will be paid by Mr. allow the Plan to dispose of illiquid REIT. Because River Glen REIT owns a 6 To recap, during 1997 and between January assets. The proposed resale of the Assets 99 percent interest in a parcel of 1999 and August 2000, the Plan has received— will be a one-time transaction for cash property known as the ‘‘Heather Glen,’’ • $44,374.91 in interest payments with respect to and the Plan will receive fair market Mr. May believed that the book value of the Israel Bonds for which it had paid an aggregate
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Wolfson to the Plan in cash. Mr. May application of section 4975 of the Code, ($343,350.57 + $2,397.46 + $13,977.81 + will update his valuations of the Assets by reason of section 4975 (c)(1)(A) $5,729.08 = $365,454.92). From the time on the date of the sale. through (E) of the Code, shall not apply of the purchase through August 18, 13. In summary, it is represented that to the proposed cash sale (the Sale) of 2000, the Property has remained vacant the transactions have satisfied or will a certain residential lot (the Property) by and no income has been generated. satisfy the statutory exemptive relief the Plan7 to Bruce and Ann Gillespie The Applicants represent that the that is available under section 408(a) of (the Applicants), disqualified persons Property has not been leased to, or used the Act because: with respect to the Plan, provided that by, any disqualified persons. (a) Each sale of the Assets was or will the following conditions are met: 3. The Applicants request an be a one-time transaction for cash. (a) The Sale is a one-time transaction exemption for the Sale. The Applicants (b) The Plan received or will receive for cash; represent that the proposed transaction no less than the fair market value of the (b) The terms and conditions of the would be feasible because it would be Assets at the time of each sale. Sale are at least as favorable to the Plan a one-time transaction for cash. (c) The sales price for each Asset was as those obtainable in an arm’s length Furthermore, the Applicants state that determined or will be determined by a transaction with an unrelated party; the transaction would be in the best qualified, independent appraiser at the (c) The Plan receives the greater of interest of the Plan because the Sale time of each sale transaction. $450,000 or the fair market value of the would enable the Plan to invest the (d) The terms of the past and Property at the time of the Sale; and proceeds from the Sale in assets with a prospective sales transactions were or (d) The Plan is not required to pay higher rate or return. The Applicants will be no less favorable to the Plan than any commissions, costs or other desire to sell the Property because they those obtainable in similar transactions expenses in connection with the Sale. wish to build a personal residence on negotiated at arm’s length with the lot. Finally, the Applicants assert Summary of Facts and Representations unrelated parties. that the transaction will be protective of (e) The Plan did not incur any fees or 1. The Plan is a defined benefit plan the rights of the Plan’s participants and commissions in connection with the which was established by the beneficiaries as indicated by the fact past sale of the Assets nor will it incur Applicants, the sole participants and that the Plan will receive the fair market any fees or commissions expenses with beneficiaries. As of March 6, 2000, the value of the Property, as determined by respect to the prospective sale of such Plan held assets valued at a qualified, independent appraiser on Assets. approximately $1.9 million. The the date of the Sale, and will incur no (f) Within 60 days of the publication, trustees of the Plan are Bruce and Ann commissions, costs, or other expenses as in the Federal Register, of the notice Gillespie. a result of the Sale. granting this proposed exemption, Mr. 2. The Property is a 34,372 square foot 4. Stephen G. Leach (Mr. Leach), an Wolfson will file a Form 5330 with the residential lot located at Forest accredited appraiser with Cushman & Service and pay all appropriate excise Highlands, Lot 781, Coconino County, Wakefield of Arizona, Inc., located in taxes that may be due and owing with Arizona. Phoenix, Arizona, appraised the respect to the sale of the Israel Bonds According to the Applicants, the Plan Property on September 5, 2000. Mr. and the extension of credit transaction. originally acquired the Property as a real Leach states that he is a full time FOR FURTHER INFORMATION CONTACT: Ms. estate investment. The Plan purchased qualified, independent appraiser, as Jan D. Broady, Department of Labor, the Property in June 24, 1998, from an demonstrated by his status as a Certified telephone (202) 219–8881. (This is not unrelated third party, the Homeowners Residential Real Estate Appraiser 8 a toll-free number.) Association of the Forest Highlands. licensed by the State of Arizona. In First of American Mortgage served as addition, Mr. Leach represents that both Gillespie Real Estate Professional the lender for the Plan’s mortgage. The he and his firm are independent of the Corporation Defined Benefit Plan (the purchase price of the Property including Applicants. Plan) Located in Phoenix, Arizona; settlement charges was $343,350.57. In his appraisal, Mr. Leach relied Proposed Exemption The Plan paid a cash deposit of primarily on the sales comparison [Applicant No. D–10880] $168,133.07 and financed the balance of approach. According to Mr. Leach, this method best represents the actions of The Department is considering the purchase price. buyers and sellers in the market place. granting an exemption under the The Applicants represent that the This method of appraisal involves an authority of section 4975(c)(2) of the only expenditures the Plan has paid analysis of similar recently sold Code and in accordance with the since owning the Property are $2,397.46 properties in the area in question so as procedures set forth in 29 CFR Part in property taxes, $5,729.08 in to derive the most probable sales price 2570, subpart B (55 FR 32836, August association fees, and $13,977.81 in loan of the Property. Mr. Leach’s appraisal 10, 1990). If the exemption is granted, interest payments from 1998 (i.e., the indicates that he compared the Property the sanctions resulting from the year of original acquisition) until August 18, 2000. Therefore, the total to nine recently sold lots in the Forest Highland’s complex before reaching a purchase price of $150,000. Thus, the Plan’s total cost to the Plan for the Property is net cost with respect to the Israel Bonds (excluding $365,454.92 as of August 18, 2000 conclusion as to the value of the Bond One which matured on November 1, 1998 and Property. After inspecting the Property was subsequently redeemed by the Plan for its 7 Because Bruce Gillespie is the sole shareholder and analyzing all relevant data, Mr. $25,000 face value) is $80,625.09. of the Employer and he and his wife, Ann Gillespie, • Leach determined that a fee simple $12,624 in distributions with respect to the are the only participants in the Plan, there is no interest in the Property had a fair market REIT Interests. Because the Plan paid $50,000 for jurisdiction under Title I of the Act pursuant to 29 the REIT Interests, its net cost with respect to this CFR 2510.3–3(b). However, there is jurisdiction value of approximately $450,000, as of investment is $37,376. under Title II of the Act under section 4975 of the September 5, 2000. • $13,457 in distributions from the AOF II Code. 5. In summary, the Applicants Partnership. Because the Plan had acquired the 1⁄4 8 The Department is expressing no opinion as to represent that the proposed transaction LP Unit for $22,500, its net cost with respect to the whether the acquisition and holding of the Land by 1 satisfies the statutory criteria of section ⁄4 LP Unit is $9,043. the Plan was a prohibited transaction under section Thus, the Plan’s overall net cost with respect to 4975(c)(1)(D) and (E) of the Code, and no relief is 4975(c)(2) of the Code because: (a) The the Assets is $127,044.09. provided herein. terms and conditions of the Sale would
VerDate 112000 19:49 Oct 30, 2000 Jkt 194001 PO 00000 Frm 00090 Fmt 4703 Sfmt 4703 E:\FR\FM\31OCN1.SGM pfrm02 PsN: 31OCN1 65016 Federal Register / Vol. 65, No. 211 / Tuesday, October 31, 2000 / Notices be at least as favorable to the Plan as participants and beneficiaries, and 301–713–7482; or electronically mailed those obtainable in an arm’s length protective of the rights of participants to [email protected]. transaction with an unrelated third and beneficiaries of the plan; FOR FURTHER INFORMATION CONTACT: party; (b) the Sale would be a one-time (3) The proposed exemptions, if Requests for additional information cash transaction allowing the Plan to granted, will be supplemental to, and should be directed to Diane Dimkoff at divest itself of the Property and reinvest not in derogation of, any other telephone number 301–713–6107, or fax the proceeds of the Sale in assets that provisions of the Act and/or the Code, number 301–713–7482. will yield a higher rate of return; (c) the including statutory or administrative SUPPLEMENTARY INFORMATION: Plan would receive an amount equal to exemptions and transitional rules. the greater of $450,000, which Furthermore, the fact that a transaction Background represents the appraised fair market is subject to an administrative or On August 11, 2000, President value of the Property, as appraised by statutory exemption is not dispositive of Clinton issued Executive Order 13166, Mr. Leach in September 2000, or the fair whether the transaction is in fact a entitled ‘‘Improving Access to Services market value of the Property at the time prohibited transaction; and for Persons With Limited English of the Sale, based on an updated (4) The proposed exemptions, if Proficiency.’’ 65 FR 50119 (August 16, appraisal of the Property by Mr. Leach granted, will be subject to the express 2000). The Executive Order directs each or another independent, qualified condition that the material facts and Federal agency to examine the services appraisal; and (d) the Plan would not be representations contained in each it provides to persons who, as a result required to pay any commissions, costs application are true and complete, and of national origin, are limited in their or other expenses in connection with that each application accurately English proficiency. Agencies must then the Plan. describes all material terms of the Notice to Interested Parties: Because develop a plan and implement measures transaction which is the subject of the that will enable persons with LEP to Mr. Gillespie is the sole shareholder of exemption. the Employer and he and his wife, Ann have meaningful access to the agency’s Gillespie, are the only participants in Signed at Washington, DC, this 25th day of programs and activities, consistent with October 2000. the Plan, it has been determined that the fundamental mission of the agency. there is no need to distribute the notice Ivan Strasfeld, NARA will submit its LEP plan to the of proposed exemption (the Notice) to Director of Exemption Determinations, Department of Justice for review and interested persons. Comments and Pension and Welfare Benefits Administration, approval by December 11, 2000. requests for a hearing are due thirty (30) U.S. Department of Labor. As part of this process, NARA is days after publication of the Notice in [FR Doc. 00–27915 Filed 10–30–00; 8:45 am] consulting its stakeholders for input on the Federal Register. BILLING CODE 4510±29±P the needs of persons with LEP. NARA is requesting comment from persons FOR FURTHER INFORMATION CONTACT: Khalif Ford of the Department, with LEP, their representative telephone (202) 219–8883 (this is not a organizations, as well as grant NATIONAL ARCHIVES AND RECORDS toll-free number). applicants and recipients, and any other ADMINISTRATION individuals or entities that make use of General Information NARA programs, facilities, activities Services for Persons With Limited The attention of interested persons is and financial opportunities. English Proficiency; Comment directed to the following: NARA’s Programs and Activities (1) The fact that a transaction is the Request NARA establishes policies and subject of an exemption under section AGENCY: National Archives and Records procedures for managing U.S. 408(a) of the Act and/or section Administration (NARA). 4975(c)(2) of the Code does not relieve Government records and assists Federal ACTION: Notice. a fiduciary or other party in interest or agencies in documenting their activities disqualified person from certain other SUMMARY: The public is invited to and administering records management provisions of the Act and/or the Code, comment on National Archives and programs. NARA preserves and including any prohibited transaction Records Administration (NARA) provides access to the essential provisions to which the exemption does programs and activities available to documentation of the three branches of not apply and the general fiduciary persons with limited English Government through a nationwide responsibility provisions of section 404 proficiency (LEP) and steps that the system of archival facilities, records of the Act, which, among other things, agency could take to ensure that persons storage facilities, and Presidential require a fiduciary to discharge his with LEP have meaningful access to Libraries. NARA operates research duties respecting the plan solely in the NARA services. NARA will use the rooms, answers written and oral interest of the participants and information gathered from this notice requests for information on its holdings, beneficiaries of the plan and in a and other outreach efforts to develop a provides copies of records, offers public prudent fashion in accordance with plan to improve access to its programs programs and exhibits, and makes section 404(a)(1)(b) of the Act; nor does and activities by eligible LEP persons. information available on its web site at it affect the requirement of section http://www.nara.gov. The National DATES: Written comments should be 401(a) of the Code that the plan must Historical Publications and Records received on or before November 30, operate for the exclusive benefit of the Commission (NHPRC), a statutory body 2000. employees of the employer maintaining affiliated with NARA, makes grants the plan and their beneficiaries; ADDRESSES: Comments should be sent nationwide to help nonprofit and (2) Before an exemption may be to: Comments on Services for Persons educational organizations identify, granted under section 408(a) of the Act with Limited English Proficiency, Attn: preserve, and provide access to and/or section 4975(c)(2) of the Code, Diane Dimkoff (NWCC), Room 2400, materials that document American the Department must find that the National Archives and Records history. NARA also publishes Federal exemption is administratively feasible, Administration, 8601 Adelphi Rd, laws and regulations, and Presidential in the interests of the plan and of its College Park, MD 20740–6001; faxed to and other public documents. It also
VerDate 112000 19:49 Oct 30, 2000 Jkt 194001 PO 00000 Frm 00091 Fmt 4703 Sfmt 4703 E:\FR\FM\31OCN1.SGM pfrm02 PsN: 31OCN1 Federal Register / Vol. 65, No. 211 / Tuesday, October 31, 2000 / Notices 65017 manages Federal classification and The remaining portions of this meeting, Dated: October 25, 2000. declassification policies. from 9:00 a.m. to 6:00 p.m. on Kathy Plowitz-Worden, November 28th and 29th, and from 9:00 Ensuring Meaningful Access to Persons Panel Coordinator, Panel Operations, a.m. to 3:30 p.m. on November 30th, National Endowment for the Arts. With Limited English Proficiency will be closed. [FR Doc. 00–27917 Filed 10–30–00; 8:45 am] NARA will use the information Visual Arts (Access, Education, and BILLING CODE 7537±01±U gathered from this notice and other Heritage/Preservation categories): outreach activities to evaluate its November 29–December 1, 2000, Room services and develop a plan to ensure 716. A portion of this meeting, from NUCLEAR REGULATORY that eligible persons with LEP have 11:00 a.m. to 12:30 p.m. on December COMMISSION meaningful access to NARA’s programs 1st, will be open to the public for policy and activities, including NHPRC grants. discussion. The remaining portions of Sunshine Act Meeting NARA will assess the language needs of this meeting, from 9:00 a.m. to 6:30 p.m. its customers, develop a comprehensive AGENCY HOLDING THE MEETING: Nuclear on November 29th and 30th, and from written policy on language access, Regulatory Commission. 9:00 a.m. to 11:00 a.m. and 12:30 p.m. increase awareness of language needs in DATE: Weeks of October 30, November 6, to 4:00 p.m. on December 1st, will be staff training and customer service, and 13, 20, 27, and December 4, 2000. closed. regularly monitor and assess the PLACE: Commissioners’ Conference language needs of customers and the Music Section B (Access, Education, Room, 11555 Rockville Pike, Rockville, effectiveness of NARA’s language and Heritage/Preservation categories): Maryland. December 5–8, 2000, Room 730. A assistance program. NARA will provide STATUS: Public and closed. its LEP customers with access to portion of this meeting, from 9:00 a.m. MATTERS TO BE CONSIDERED: NARA’s programs and activities in a to 10:30 a.m. on December 7th, will be way that is practical, effective, fiscally open to the public for policy discussion. Week of October 30 The remaining portions of this meeting, responsible, and capable of being There are no meetings scheduled for readily implemented. from 9:00 a.m. to 5:30 p.m. on December the Week of October 30. Dated: October 25, 2000. 5th and 6th, from 10:30 a.m. to 6:00 Week of November 6—Tentative John W. Carlin, p.m. on December 7th, and from 9:00 a.m. to 3:00 p.m. on December 8th, will Archivist of the United States. There are no meetings scheduled for be closed. [FR Doc. 00–27901 Filed 10–30–00; 8:45 am] the Week of November 6. The closed portions of these meetings BILLING CODE 7515±01±U Week of November 13—Tentative are for the purpose of Panel review, discussion, evaluation, and Wednesday, November 15, 2000 recommendation on applications for NATIONAL FOUNDATION ON THE 10:00 a.m.—Briefing by the Executive financial assistance under the National ARTS AND THE HUMANITIES Branch (Closed—Ex. 1) Foundation on the Arts and the Friday, November 17 National Endowment for the Arts; Humanities Act of 1965, as amended, Combined Arts Advisory Panel including information given in 9:25 a.m.—Affirmation Session (Public confidence to the agency by grant Meeting) (if needed) Pursuant to section 10(a)(2) of the applicants. In accordance with the 9:30 a.m.—Briefing on Risk-Informed Federal Advisory Committee Act (Public determination of the Chairman of May Regulation Implementation Plan Law 92–463), as amended, notice is 12, 2000, these sessions will be closed (Public Meeting) (Contact: Tom hereby given that four meetings of the to the public pursuant to (c)(4)(6) and King, 301–415–5790) Combined Arts Advisory Panel to the (9)(B) of section 552b of Title 5, United This meeting will be webcast live at National Council on the Arts will be States Code. the Web address—www.nrc.gov/ held at the Nancy Hanks Center, 1100 Any person may observe meetings, or live.html. Pennsylvania Avenue, NW., portions thereof, of advisory panels that Week of November 20—Tentative Washington, D.C., 20506 as follows: are open to the public, and, if time Theater/Musical Theater (Access, allows, may be permitted to participate There are no meetings scheduled for Education, and Heritage/Preservation in the panel’s discussions at the the Week of November 20. categories): November 27–December 1, discretion of the panel chairman and Week of November 27—Tentative 2000, Room 714. A portion of this with the approval of the full-time meeting, from 3:00 p.m. to 5:00 p.m. on Federal employee in attendance. Monday, November 27, 2000 November 29th, will be open to the 9:00 a.m.—Briefing by DOE on public for policy discussion. The If you need special accommodations Plutonium Disposition and MOX remaining portions of this meeting, from due to a disability, please contact the Fuel Fabrication Facility Licensing 9:30 a.m. to 7:00 p.m. on November Office of AccessAbility, National (Public Meeting) 27th, 28th, and 30th, from 9:00 a.m. to Endowment for the Arts, 1100 3:00 p.m. and 5:00 p.m. to 7:00 p.m. on Pennsylvania Avenue, NW., This meeting will be webcast live at November 28th, and from 9:30 a.m. to Washington, D.C. 20506, 202/682–5532, the Web address—www.nrc.gov/ 5:00 p.m. on December 1st, will be TDY–TDD 202/682–5496, at least seven live.html. (7) days prior to the meeting. closed. Week of December 4—Tentative Music Section A (Access, Education, Further information with reference to and Heritage/Preservation categories): this meeting can be obtained from Ms. Monday, December 4 November 28–30, 2000, Room 730. A Kathy Plowitz-Worden, Office of 1:55 p.m.—Affirmation Session (Public portion of this meeting, from 3:30 p.m. Guidelines & Panel Operations, National Meeting) (if needed) to 5:00 p.m. on November 30th, will be Endowment for the Arts, Washington, 2:00 p.m.—Briefing on License Renewal open to the public for policy discussion. D.C., 20506, or call 202/682–5691. Generic Aging Lessons Learned
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(GALL) Report, Standard Review accident sampling imposed on licensees evaluation, referencing the applicable Plan (SRP), and Regulatory Guide through orders, license conditions, or technical justifications, and providing (Public Meeting) (Contact: Chris technical specifications. The NRC staff any necessary plant-specific Grimes, 301–415–1183) has also prepared a model no significant information. Each amendment This meeting will be webcast live at hazards consideration (NSHC) application made in response to the the Web address—www.nrc.gov/ determination relating to this matter. notice of availability would be live.html. The purpose of these models is to processed and noticed in accordance Note: The schedule for Commission permit the NRC to efficiently process with applicable rules and NRC meetings is subject to change on short notice. amendments that propose to remove procedures. To verify the status of meetings call requirements for the Post Accident This proposed change was proposed (Recording)—(301) 415–1292. Contact Person Sampling System (PASS). Licensees of for incorporation into the Standard for more information: Bill Hill (301) 415– nuclear power reactors to which the Technical Specifications by the 1661. models apply may request amendments, Westinghouse Owners Group (WOG) SUPPLEMENTARY INFORMATION: By a vote in accordance with Section 50.90 of and the Combustion Engineering of 5–0 on October 23, the Commission Title 10 to the Code of Federal Owners Group (CEOG) participants in determined pursuant to U.S.C. 552b(e) Regulations, confirming the the Technical Specification Task Force and § 9.107(a) of the Commission’s rules applicability of the SE and NSHC (TSTF) and is designated TSTF–366. A that ‘‘Affirmation of Final Rules—10 determination to their reactors and notice of opportunity to comment on the CFR Part 35, ‘Medical Use of Byproduct providing the requested plant-specific use of CLIIP for the elimination of Material’ and 10 CFR Part 20, ‘Standards verifications and commitments. requirements for PASS and related for Protection Against Radiation’ ’’ be DATES: The period during which administrative controls in technical held on October 23, and on less than licensees may reference the model SE specifications for plants with one week’s notice to the public. and NSHC determination expires Westinghouse and Combustion The NRC Commission Meeting October 31, 2001. Applications for Engineering designs was published in Schedule can be found on the Internet amendments after this date must the Federal Register on August 11, 2000 at: http://www.nrc.gov/SECY/smj/ include plant-specific justifications for (65 FR 49271). The nine comments submitted to the NRC staff in response schedule.htm the proposed changes and an analysis to the solicitation are addressed later in This notice is distributed by mail to about the issue of no significant hazards this notice. several hundred subscribers; if you no consideration. longer wish to receive it, or would like FOR FURTHER INFORMATION CONTACT: Applicability to be added to it, please contact the William Reckley, Mail Stop: O–7D1, This application of the CLIIP to Office of the Secretary, Attn: Operations Division of Licensing Project Branch, Washington, D.C. 20555 (301– remove requirements for PASS from Management, Office of Nuclear Reactor technical specifications (and other 415–1661). In addition, distribution of Regulation, U.S. Nuclear Regulatory this meeting notice over the Internet elements of the licensing bases) is Commission, Washington, DC 20555– applicable to plants with Westinghouse system is available. If you are interested 0001, telephone 301–415–1323. in receiving this Commission meeting and Combustion Engineering designs. SUPPLEMENTARY INFORMATION: To efficiently process the incoming schedule electronically, please send an license amendment applications, the electronic message to [email protected] or Background staff requests each licensee applying for [email protected]. Regulatory Issue Summary 2000–06, the changes addressed by TSTF–366 Dated: October 27, 2000. ‘‘Consolidated Line Item Improvement using the CLIIP to address the plant- William M. Hill, Jr., Process for Adopting Standard specific verifications and regulatory SECY Tracking Officer, Office of the Technical Specification Changes for commitments that are identified in the Secretary. Power Reactors,’’ was issued on March model SE. The CLIIP does not prevent [FR Doc. 00–28035 Filed 10–27–00; 2:15 pm] 20, 2000. The consolidated line item licensees from requesting an alternative BILLING CODE 7590±01±M improvement process (CLIIP) is approach or proposing the changes intended to improve the efficiency of without the requested verifications and NRC licensing processes. This is regulatory commitments. Licensees NUCLEAR REGULATORY accomplished by processing proposed choosing to request an approach COMMISSION changes to the Standard Technical different than that described in this Specifications (STS) in a manner that notice should submit applications with Notice of Availability for Referencing in supports subsequent license amendment appropriate plant-specific justifications License Amendment ApplicationsÐ applications. The CLIIP includes an for the proposed changes and an Model Safety Evaluation on Technical opportunity for the public to comment analysis about the issue of no significant Specification Improvement To on proposed changes to the STS hazards consideration. Variations from Eliminate Requirements on Post following a preliminary assessment by the approach recommended in this Accident Sampling Systems Using the the NRC staff and finding that the notice may require additional review by Consolidated Line Item Improvement change will likely be offered for the NRC staff and may increase the time Process adoption by licensees. The CLIIP directs and resources needed for the review. AGENCY: Nuclear Regulatory the NRC staff to evaluate any comments In making the requested regulatory Commission. received for a proposed change to the commitments, each licensee should ACTION: Notice of availability. STS and to either reconsider the change address: (1) That the subject capability or to proceed with announcing the exists (or will be developed) and will be SUMMARY: Notice is hereby given that availability of the change for proposed maintained; (2) where the capability or the staff of the Nuclear Regulatory adoption by licensees. Those licensees procedure will be described (e.g., severe Commission (NRC) has prepared a opting to apply for the subject change to accident management guidelines, model safety evaluation (SE) relating to their technical specifications are emergency operating procedures, the elimination of requirements on post responsible for reviewing the staff’s emergency plan implementing
VerDate 112000 19:49 Oct 30, 2000 Jkt 194001 PO 00000 Frm 00093 Fmt 4703 Sfmt 4703 E:\FR\FM\31OCN1.SGM pfrm02 PsN: 31OCN1 Federal Register / Vol. 65, No. 211 / Tuesday, October 31, 2000 / Notices 65019 procedures); and (3) a schedule for licensees, one from the Nuclear Energy currently use PASS for assessing the 300 implementation. The amendment Institute, one from a law firm that µCi/ml does equivalent iodine criterion request need not provide details about represents licensees, and one from a for declaration of an Alert. The staff did designs or procedures. Each licensee member of the public) as a result of the not revise the model SE in response to should verify that it has, and make a notice of opportunity to comment about this comment. regulatory commitment to maintain (or the subject technical specification 4. A commenter suggested that the use make a regulatory commitment to changes. Five of the letters received of the CLIIP to eliminate PASS develop and maintain): included general comments in favor of requirements be expanded to all a. Contingency plans for obtaining the CLIIP and its use in eliminating licensed facilities. The staff may choose and analyzing highly radioactive requirements for PASS. Specific to use the CLIIP to address the removal samples from the reactor coolant comments on the model SE were offered of PASS from plants with other than system, containment sump, and in four of the comment letters. The Westinghouse and Combustion containment atmosphere; specific comments are discussed below: Engineering designs. Such a use of the b. A capability for classifying fuel 1. A licensee suggested that the model CLIIP would follow a specific proposal damage events at the Alert level SE include a discussion indicating that and justification from the applicable threshold (typically this is 300 µCi/ml the contingency plans do not have to be owners groups similar to the TSTF dose equivalent iodine). This capability carried out in emergency plans and submitted by the WOG and CEOG. The may use the normal sampling system exercises. A similar statement was staff did not revise the model SE in and/or correlations of sampling or included in the staff’s SE for the topical response to this comment. letdown line dose rates to coolant report prepared by the WOG. The staff This notice is announcing the concentrations; and agrees with the comment and added a availability of the model safety c. The capability to monitor sentence to the model SE. evaluation and model NSHC radioactive iodines that have been 2. A licensee stated that some plants determination for referencing in released to offsite environs. have safety-related hydrogen monitors applications for amendments to Public Notices with ranges significantly above technical specifications for applicable hydrogen concentrations of 10% that plants. Licensees wishing to adopt the The staff issued a Federal Register could be used for severe accident change must submit an application in Notice (64 FR 66213, November 24, conditions. The staff believes that the accordance with applicable regulatory 1999) that requested public comment on model SE provides the necessary requirements. The staff will in turn the NRC’s pending action to approve flexibility for plant-specific differences issue for each application a notice of topical reports submitted by the WOG in the ranges of the monitors by stating consideration of issuance of amendment and the CEOG in which they proposed that the appropriate decision-makers to eliminate regulatory requirements for to facility operating license(s), a may determine if a grab sample is proposed NSHC determination, and an PASS. In particular, the staff sought necessary and practical during the comment from offsite emergency opportunity for a hearing. A notice of management of a severe accident. A issuance of an amendment to operating response organizations so that any contingency plan for sampling the impact of the elimination of PASS on license(s) will also be issued to containment atmosphere also serves to announce the elimination of the PASS their response could be factored into the confirm the indications from the staff’s evaluation. Appendices to the requirements for each plant that applies monitors and provide information on for and receives the requested change. staff’s safety evaluations for topical parameters other than hydrogen reports submitted by the CEOG and the concentrations (e.g., the mix of Model Safety Evaluation WOG contain a synopsis of the public radionuclides) and should, for U.S. Nuclear Regulatory Commission comments received and the staff’s consideration of the amendment as part evaluation of the comments. The topical of the CLIIP, be part of the plant-specific Office of Nuclear Reactor Regulation reports as well as the NRC staff’s safety regulatory commitment discussed in the Consolidated Line Item Improvement evaluations for the topical reports may model SE. The staff did not revise the be examined, and/or copied for a fee, at model SE in response to this comment. Technical Specification Task Force the NRC’s Public Document Room, 3. A licensee suggested that the Alert (TSTF) Change TSTF–366 located at One White Flint North, 11555 level threshold (typically 300 µCi/ml Elimination of Requirements for Post Rockville Pike (first floor), Rockville, dose equivalent iodine) recognize an Accident Sampling System (PASS) Maryland. Publicly available records alternative of 2% to 5% fuel clad will be accessible electronically from damage and that instrumentation such 1.0 Introduction the ADAMS Public Library component as core exit thermocouples or radiation In the aftermath of the accident at on the NRC Web site, (the Electronic monitors might also be indicative of fuel Three Mile Island (TMI), Unit 2, the Reading Room). The staff’s safety clad damage. The staff did not intend to Nuclear Regulatory Commission (NRC) evaluations that address the public preclude the use of other parameters as imposed requirements on licensees for comments about the topical reports are an indication of the loss of or challenge commercial nuclear power plants to available on ADAMS (Accession to the fuel clad fission product barrier. install and maintain the capability to Numbers ML003715250 dated May 16, The staff included the regulatory obtain and analyze post-accident 2000, for the CEOG topical report and commitment (item 4.2) in the model SE samples of the reactor coolant and ML003723268 dated June 14, 2000, for to address classifying certain types of containment atmosphere. The desired the WOG topical report). events (such as reactivity excursions or capabilities of the Post Accident A notice soliciting comments from mechanical damage) which could cause Sampling System (PASS) were interested members of the public about fuel damage without having an described in NUREG–0737, the use of the CLIIP for elimination of indication of overheating on core exit ‘‘Clarification of TMI Action Plan requirements for PASS was published in thermocouples. The mention of normal Requirements.’’ The NRC issued orders the Federal Register on August 11, 2000 sampling or letdown line dose rates in to licensees with plants operating at the (65 FR 49271). The staff received nine the model SE is intended to be time of the TMI accident to confirm the comments (six from individual alternatives for those licensees that installation of PASS capabilities
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(generally as they had been described in 2.0 Background The ways in which the requirements NUREG–0737). A requirement for PASS In a letter dated May 5, 1999 (as and recommendations for PASS were and related administrative controls was supplemented by letter dated April 14, incorporated into the licensing bases of added to the technical specifications 2000), the CEOG submitted the topical commercial nuclear power plants varied (TS) of the operating plants and was report CE NPSD–1157, Revision 1, as a function of when plants were included in the initial TS for plants ‘‘Technical Justification for the licensed. Plants that were operating at licensed during the 1980s and 90s. Elimination of the Post-Accident the time of the TMI accident are likely Additional expectations regarding PASS Sampling System From the Plant Design to have been the subject of confirmatory capabilities were included in Regulatory and Licensing Bases for CEOG orders that imposed the PASS functions Guide 1.97, ‘‘Instrumentation for Light- Utilities.’’ A similar proposal was described in NUREG–0737 as Water-Cooled Nuclear Power Plants To submitted on October 26, 1998 (as obligations. The issuance of plant Assess Plant and Environs Conditions supplemented by letters dated April 28, specific amendments to adopt this During and Following an Accident.’’ 1999, April 10 and May 22, 2000), by change, which would remove PASS and Significant improvements have been the WOG in its topical report WCAP– related administrative controls from TS, achieved since the TMI accident in the 14986, ‘‘Post Accident Sampling System supersede the PASS specific areas of understanding risks associated Requirements: A Technical Basis.’’ The requirements imposed by post-TMI with nuclear plant operations and reports provided evaluations of the confirmatory orders. developing better strategies for information obtained from PASS As described in its safety evaluations managing the response to potentially samples to determine the contribution for the topical reports, the staff finds severe accidents at nuclear plants. of the information to plant safety and that the following PASS sampling Recent insights about plant risks and accident recovery. The reports requirements may be eliminated for alternate severe accident assessment considered the progression and plants of Combustion Engineering and tools have led the NRC staff to conclude consequences of core damage accidents Westinghouse designs: 1. Reactor coolant dissolved gases that some TMI Action Plan items can be and assessed the accident progression 2. Reactor coolant hydrogen revised without reducing the ability of with respect to plant abnormal and licensees to respond to severe accidents. 3. Reactor coolant oxygen emergency operating procedures, severe 4. Reactor coolant pH The NRC’s efforts to oversee the risks accident management guidance, and associated with nuclear technology 5. Reactor coolant chlorides emergency plans. The reports provided 6. Reactor coolant boron more effectively and to eliminate undue the owners groups’ technical 7. Reactor coolant conductivity regulatory costs to licensees have justifications for the elimination for the 8. Reactor coolant radionuclides prompted the NRC to consider various PASS sampling requirements. 9. Containment atmosphere hydrogen eliminating the requirements for PASS The specific samples and the staff’s concentration in TS and other parts of the licensing findings are described in the following 10. Containment oxygen bases of operating reactors. evaluation. 11. Containment atmosphere The staff has completed its review of The NRC staff prepared this model radionuclides the topical reports submitted by the safety evaluation (SE) relating to the 12. Containment sump pH Combustion Engineering Owners Group elimination of requirements on post 13. Containment sump chlorides (CEOG) and the Westinghouse Owners accident sampling and solicited public 14. Containment sump boron Group (WOG) that proposed the comment (65 FR 49271) in accordance 15. Containment sump radionuclides elimination of PASS. The justifications with the consolidated line item The staff agrees that sampling of for the proposed elimination of PASS improvement process (CLIIP). The use radionuclides is not required to support requirements center on evaluations of of the CLIIP in this matter is intended emergency response decision making the various radiological and chemical to help the NRC to efficiently process during the initial phases of an accident sampling and their potential usefulness amendments that propose to remove the because the information provided by in responding to a severe reactor PASS requirements from TS. Licensees PASS is either unnecessary or is accident or making decisions regarding of nuclear power reactors to which this effectively provided by other actions to protect the public from model apply were informed [FR] that indications of process parameters or possible releases of radioactive they could request amendments measurement of radiation levels. materials. As explained in more detail confirming the applicability of the SE to Therefore, it is not necessary to have in the staff’s safety evaluations for the their reactors and providing the dedicated equipment to obtain this two topical reports, the staff has requested plant-specific verifications sample in a prompt manner. reviewed the available sources of and commitments. The staff does, however, believe that information for use by decision-makers there could be significant benefits to in developing protective action 3.0 Evaluation having information about the recommendations and assessing core The technical evaluations for the radionuclides existing post-accident in damage. Based on this review, the staff elimination of PASS sampling order to address public concerns and found that the information provided by requirements are provided in the safety plan for long-term recovery operations. PASS is either unnecessary or is evaluations dated May 16, 2000, for the As stated in the safety evaluations for effectively provided by other CEOG topical report CE NPSD–1157 and the topical reports, the staff has found indications of process parameters or June 14, 2000, for the WOG topical that licensees could satisfy this function measurement of radiation levels. The report WCAP–14986. The NRC staff’s by developing contingency plans to staff agrees, therefore, with the owners safety evaluations approving the topical describe existing sampling capabilities groups that licensees can remove the TS reports are located in the NRC’s and what actions (e.g., assembling requirements for PASS, revise (as Agencywide Documents Access and temporary shielding) may be necessary necessary) other elements of the Management System (ADAMS) to obtain and analyze highly radioactive licensing bases, and pursue possible (Accession Numbers ML003715250 for samples from the reactor coolant system design changes to alter or remove CE NPSD–1157 and ML003723268 for (RCS), containment sump, and existing PASS equipment. WCAP–14986). containment atmosphere. (See item 4.1
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The contingency plans for 10 CFR 50.44(b)(1), are addressed in included in the licensee’s application to obtaining samples from the RCS, NUREG–0737 Item II.F.1 and Regulatory revise the TS in order to take advantage containment sump, and containment Guide 1.97, and are relied upon to meet of the CLIIP. The staff has reviewed the atmosphere may also enable a licensee the data reporting requirements of 10 changes and agrees that the revisions are to derive information on parameters CFR Part 50, Appendix E, Section necessary due to the removal of the TS such as hydrogen concentrations in VI.2.a.(i)(4). The staff concludes that section on PASS. The changes do not containment and boron concentration during the early phases of an accident, revise technical requirements beyond and pH of water in the containment the safety-grade hydrogen monitors that reviewed by the NRC staff in sump. The staff considers the sampling provide an adequate capability for connection with the supporting topical of the containment sump to be monitoring containment hydrogen reports or the preparation of the TS potentially useful in confirming concentration. The staff sees value in improvement incorporated into the calculations of pH and boron maintaining the capability to obtain grab CLIIP. concentrations and confirming that samples for complementing the (B) The TS include an administrative potentially unaccounted for acid information from the hydrogen monitors requirement for a program to minimize sources have been sufficiently in the long term (i.e., by confirming the to levels as low as practicable the neutralized. The use of the contingency indications from the monitors and leakage from those portions of systems plans for obtaining samples would providing hydrogen measurements for outside containment that could contain depend on the plant conditions and the concentrations outside the range of the highly radioactive fluids during a need for information by the decision- monitors). As previously mentioned, the serious transient or accident. The makers responsible for responding to licensee’s contingency plan (see item program includes preventive the accident. 4.1) for obtaining highly radioactive maintenance, periodic inspections, and In addition, the staff considers samples will include sampling of the leak tests for the identified systems. radionuclide sampling information to be containment atmosphere and may, if PASS is specifically listed in TS [5.5.2] useful in classifying certain types of deemed necessary and practical by the as falling under the scope of this events (such as a reactivity excursion or appropriate decision-makers, be used to requirement. The applicability of this mechanical damage) that could cause supplement the safety-related hydrogen specification depends on whether or not fuel damage without having an monitors. PASS is maintained as a system that is indication of overheating on core exit [Note 1—Each licensee should specify a potential leakage path. (Note that thermocouples. However, the staff a desired implementation period for its several options (see following) exist for agrees with the topical reports’ specific amendment request. The handling the impact that eliminating contentions that other indicators of implementation period would be that PASS requirements would have on the failed fuel, such as letdown radiation period necessary to develop and specification for the program to control monitors (or normal sampling system), implement the items in 4.1 through 4.3 leakage outside containment.) can be correlated to the degree of failed and, as necessary, to make other (i) The licensee has stated that a plant fuel. (See item 4.2 under Licensee changes to documentation or equipment change will be implemented such that Verifications and Commitments.) to support the elimination of PASS PASS will not be a potential leakage In lieu of the information that would requirements. As an alternative, the path outside containment for highly have been obtained from PASS, the staff licensee may choose to have a shorter radioactive fluids (e.g., the PASS piping believes that licensees should maintain implementation period and include the that penetrates the containment would or develop the capability to monitor scheduling of items 4.1 through 4.3 as be cut and capped). The modification radioactive iodines that have been part of the regulatory commitments will be made during the implementation released to offsite environs. Although associated with this amendment period for this amendment such that it this capability may not be needed to request. Amendment requests that is appropriate to delete the reference to support the immediate protective action include commitments for PASS in TS [5.5.2]. Requirements in recommendations during an accident, implementation of the items in Section NRC regulations (e.g., 10 CFR Part 50, the information would be useful for 4 within 6 months of the Appendix J) and other TS provide decision makers trying to limit the implementation of the revised TS will adequate regulatory controls over the public’s ingestion of radioactive remain within the CLIIP.] licensee’s proposed modification to materials. (See item 4.3 under Licensee [Note 2—There may be some eliminate PASS as a potential leakage Verifications and Commitments.) collateral changes to the TS as a result path. The staff believes that the changes of the removal of the administrative (ii) The licensee has stated that a related to the elimination of PASS that controls section for PASS. The plant change might be implemented are described in the topical reports, following paragraphs address three such that PASS would not be a potential related safety evaluations and this potential changes that the staff is aware leakage path outside containment for proposed change to TS are unlikely to of (editorial changes, mention of PASS highly radioactive fluids (e.g., the PASS result in a decrease in the effectiveness as a potential leakage source outside piping that penetrates the containment of a licensee’s emergency plan. Each containment, and revision of the bases might be cut and capped). The licensee, however, must evaluate section for post accident monitoring modification will not, however, be made possible changes to its emergency plan instrumentation]. during the implementation period for in accordance with 10 CFR 50.54(q) to (A) The elimination of the TS and this amendment. The licensee has determine if the change decreases the other regulatory requirements for PASS proposed to add the following phrase to effectiveness of its site-specific plan. would result in additional changes to the reference to PASS in TS [5.5.2]: Evaluations and reporting of changes to TS such as [e.g., the renumbering of ‘‘(until such time as a modification
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The staff has this amendment. Requirements in NRC or made a regulatory commitment to determined that the commitments do regulations (10 CFR Part 50, Appendix develop] contingency plans for not warrant the creation of regulatory J) and other TS provide adequate obtaining and analyzing highly requirements which would require prior regulatory controls over the licensee’s radioactive samples from the RCS, NRC approval of subsequent changes. modification to eliminate PASS as a containment sump, and containment The NRC staff has agreed that NEI 99– potential leakage path. Following the atmosphere. The licensee has 04, Revision 0, ‘‘Guidelines for modification to eliminate PASS as a committed to maintain the contingency Managing NRC Commitment Changes,’’ potential leakage path, the licensee may plans within its [specified document or provides reasonable guidance for the elect (in order to maintain clarity and program]. The licensee has control of regulatory commitments simplicity of the requirement) to revise [implemented this commitment or will made to the NRC staff. (See Regulatory TS [5.5.2] to remove the reference to implement this commitment by Issue Summary 2000–17, Managing PASS, including the phrase added by (specified date)]. Regulatory Commitments Made by this amendment. 4.2 Each licensee should verify that Power Reactor Licensees to the NRC (iii) The licensee has stated that the it has, and make a regulatory configuration of the PASS will continue commitment to maintain (or make a Staff, dated September 21, 2000.) The to be a potential leakage path outside regulatory commitment to develop and commitments should be controlled in containment for highly radioactive maintain), a capability for classifying accordance with the industry guidance fluids (e.g., the PASS piping will fuel damage events at the Alert level or comparable criteria employed by a penetrate the containment with valves threshold (typically this is 300 µCi/ml specific licensee. The staff may choose or other components in the system from dose equivalent iodine). This capability to verify the implementation and which highly radioactive fluid could may utilize the normal sampling system maintenance of these commitments in a leak). The licensee has [not proposed to and/or correlations of sampling or future inspection or audit. change TS (5.5.2) or has changed TS letdown line dose rates to coolant 5.0 State Consultation (5.5.2) to revise the reference to this concentrations. system from PASS to ( )]. The staff The licensee has [verified that it has In accordance with the Commission’s agrees [that TS 5.5.2 is not affected or or made a regulatory commitment to regulations, the [ ] State official was that the change to revise the reference develop] a capability for classifying fuel notified of the proposed issuance of the from PASS to ( )] is acceptable. A damage events at the Alert level amendments. The State official had [(1) separate amendment request will be threshold. The licensee has committed no comments or (2) the following required if the licensee, subsequent to to maintain the capability for the Alert comments—with subsequent this amendment, decides to modify the classification within its [specified disposition by the staff]. plant to eliminate this potential leakage document or program]. The licensee has path and proposes to change the [implemented this commitment or will 6.0 Environmental Consideration implement this commitment by requirements of TS (5.5.2)]. The amendments change a (C) [Note-optional section if licensee (specified date)]. 4.3 Each licensee should verify that requirement with respect to the provides markup of affected Bases installation or use of a facility pages] The elimination of PASS affects it has, and make a regulatory commitment to maintain (or make a component located within the restricted the discussion in the Bases section for area as defined in 10 CFR Part 20 and TS [3.3.3, ‘‘Post Accident Monitoring regulatory commitment to develop and maintain), the capability to monitor change surveillance requirements. The Instrumentation’’]. NRC staff has determined that the The current Bases mention the radioactive iodines that have been amendments involve no significant capabilities of PASS as part of the released to offsite environs. increase in the amounts and no justification for allowing both hydrogen The licensee has [verified that it has significant change in the types of any monitor channels to be out of service for or made a regulatory commitment to a period of up to 72 hours. Although the develop] the capability to monitor effluents that may be released offsite, licensee’s application included possible radioactive iodines that have been and that there is no significant increase wording for the revised Bases released to offsite environs. The licensee in individual or cumulative discussion for TS [3.3.3], the licensee has committed to maintain the occupational radiation exposure. The will formally address the change to the capability for monitoring iodines within Commission has previously issued a Bases in accordance with [the Bases its [specified document or program]. proposed finding that the amendments Control Program or its administrative The licensee has [implemented this involve no significant hazards procedure for revising Bases]. commitment or will implement this consideration, and there has been no commitment by (specified date)]. public comment on such finding (FR). 4.0 Verifications and Commitments The NRC staff finds that reasonable Accordingly, the amendments meet the As requested by the staff in the notice controls for the implementation and for eligibility criteria for categorical of availability for this TS improvement, subsequent evaluation of proposed exclusion set forth in 10 CFR the licensee has addressed the following changes pertaining to the above 51.22(c)(9). Pursuant to 10 CFR 51.22(b) plant-specific verifications and regulatory commitments are provided no environmental impact statement or commitments. by the licensee’s administrative environmental assessment need be 4.1 Each licensee should verify that processes, including its commitment prepared in connection with the it has, and make a regulatory management program. Should the issuance of the amendments.
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7.0 Conclusion hazards consideration is presented the post-TMI–2 accident guidance The Commission has concluded, below: through the use of the SAMGs, the emergency plan (EP), the emergency based on the considerations discussed Criterion 1—The Proposed Change Does operating procedures (EOP), and site above, that: (1) There is reasonable Not Involve a Significant Increase in the survey monitoring that support assurance that the health and safety of Probability or Consequences of an modification of emergency plan the public will not be endangered by Accident Previously Evaluated protective action recommendations operation in the proposed manner, (2) The PASS was originally designed to such activities will be conducted in (PARs). perform many sampling and analysis Therefore, the elimination of PASS compliance with the Commission’s functions. These functions were requirements from Technical regulations, and (3) the issuance of the designed and intended to be used in Specifications (TS) (and other elements amendments will not be inimical to the post accident situations and were put of the licensing bases) does not involve common defense and security or to the into place as a result of the TMI–2 a significant increase in the health and safety of the public. accident. The specific intent of the consequences of any accident Model No Significant Hazards PASS was to provide a system that has previously evaluated. Consideration Determination the capability to obtain and analyze samples of plant fluids containing Criterion 2—The Proposed Change Does Description of Amendment Request: potentially high levels of radioactivity, Not Create the Possibility of a New or The proposed amendment deletes without exceeding plant personnel Different Kind of Accident From Any requirements from the Technical radiation exposure limits. Analytical Previously Evaluated Specifications (and, as applicable, other results of these samples would be used The elimination of PASS related elements of the licensing bases) to largely for verification purposes in requirements will not result in any maintain a Post Accident Sampling aiding the plant staff in assessing the failure mode not previously analyzed. System (PASS). Licensees were extent of core damage and subsequent The PASS was intended to allow for generally required to implement PASS offsite radiological dose projections. The verification of the extent of reactor core upgrades as described in NUREG–0737, system was not intended to and does damage and also to provide an input to ‘‘Clarification of TMI [Three Mile not serve a function for preventing offsite dose projection calculations. The Island] Action Plan Requirements,’’ and accidents and its elimination would not PASS is not considered an accident Regulatory Guide 1.97, affect the probability of accidents precursor, nor does its existence or ‘‘Instrumentation for Light-Water- previously evaluated. elimination have any adverse impact on Cooled Nuclear Power Plants to Assess In the 20 years since the TMI–2 the pre-accident state of the reactor core Plant and Environs Conditions During accident and the consequential or post accident confinement of and Following an Accident.’’ promulgation of post accident sampling radionuclides within the containment Implementation of these upgrades was requirements, operating experience has building. an outcome of the lessons learned from demonstrated that a PASS provides Therefore, this change does not create the accident that occurred at TMI, Unit little actual benefit to post accident the possibility of a new or different kind 2. Requirements related to PASS were mitigation. Past experience has of accident from any previously imposed by Order for many facilities indicated that there exists in-plant evaluated. and were added to or included in the instrumentation and methodologies technical specifications (TS) for nuclear available in lieu of a PASS for collecting Criterion 3—The Proposed Change Does power reactors currently licensed to and assimilating information needed to Not Involve a Significant Reduction in operate. Lessons learned and assess core damage following an the Margin of Safety improvements implemented over the accident. Furthermore, the The elimination of the PASS, in light last 20 years have shown that the implementation of Severe Accident of existing plant equipment, information obtained from PASS can be Management Guidance (SAMG) instrumentation, procedures, and readily obtained through other means or emphasizes accident management programs that provide effective is of little use in the assessment and strategies based on in-plant instruments. mitigation of and recovery from reactor mitigation of accident conditions. These strategies provide guidance to the accidents, results in a neutral impact to The NRC staff issued a notice of plant staff for mitigation and recovery the margin of safety. Methodologies that opportunity for comment in the Federal from a severe accident. Based on current are not reliant on PASS are designed to Register on August 11, 2000 (65 FR severe accident management strategies provide rapid assessment of current 49271) on possible amendments to and guidelines, it is determined that the reactor core conditions and the eliminate PASS, including a model PASS provides little benefit to the plant direction of degradation while safety evaluation and model no staff in coping with an accident. effectively responding to the event in significant hazards consideration The regulatory requirements for the order to mitigate the consequences of (NSHC) determination, using the PASS can be eliminated without the accident. The use of a PASS is consolidated line item improvement degrading the plant emergency redundant and does not provide quick process. The NRC staff subsequently response. The emergency response, in recognition of core events or rapid issued a notice of availability of the this sense, refers to the methodologies response to events in progress. The models for referencing in license used in ascertaining the condition of the intent of the requirements established as amendment applications in the Federal reactor core, mitigating the a result of the TMI–2 accident can be Register on [ ] (65 FR). The licensee consequences of an accident, assessing adequately met without reliance on a affirmed the applicability of the and projecting offsite releases of PASS. following NSHC determination in its radioactivity, and establishing Therefore, this change does not application dated [ ]. protective action recommendations to involve a significant reduction in the Basis for proposed no significant be communicated to offsite authorities. margin of safety. hazards consideration determination: The elimination of the PASS will not Based upon the reasoning presented As required by 10 CFR 50.91(a), an prevent an accident management above and the previous discussion of analysis of the issue of no significant strategy that meets the initial intent of the amendment request, the requested
VerDate 112000 19:49 Oct 30, 2000 Jkt 194001 PO 00000 Frm 00098 Fmt 4703 Sfmt 4703 E:\FR\FM\31OCN1.SGM pfrm02 PsN: 31OCN1 65024 Federal Register / Vol. 65, No. 211 / Tuesday, October 31, 2000 / Notices change does not involve a significant These draft guides have not received For the Nuclear Regulatory Commission. hazards consideration. complete staff approval and do not Clare V. Kasputys, Dated at Rockville, Maryland, this 25th day represent an official NRC staff position. Deputy Director, Program Management, of October 2000. Comments may be accompanied by Policy Development & Analysis Staff, Office of Nuclear Regulatory Research. For the Nuclear Regulatory Commission. relevant information or supporting data. [FR Doc. 00–27939 Filed 10–30–00; 8:45 am] William D. Beckner, Written comments may be submitted to the Rules and Directives Branch, Office BILLING CODE 7590±01±P Chief, Technical Specification Branch, Division of Regulatory Improvement of Administration, U.S. Nuclear Regulatory Commission, Washington, Programs, Office of Nuclear Reactor OFFICE OF MANAGEMENT AND Regulation. DC 20555. Copies of comments received BUDGET [FR Doc. 00–27941 Filed 10–30–00; 8:45 am] may be examined at the NRC Public Document Room, 11555 Rockville Pike, BILLING CODE 7590±01±P Cost of Hospital and Medical Care Rockville, MD. Comments will be most Treatment Furnished by the United helpful if received by December 29, States; Certain Rates Regarding 2000. NUCLEAR REGULATORY Recovery From Tortiously Liable Third COMMISSION You may also provide comments via Persons the NRC’s interactive rulemaking Draft Regulatory Guides; Issuance, website through the NRC home page By virtue of the authority vested in Availability (http://www.nrc.gov). This site provides the President by Section 2(a) of Public the availability to upload comments as Law 87–693 (76 Stat. 593; 42 U.S.C. The Nuclear Regulatory Commission files (any format), if your web browser 2652), and delegated to the Director of has issued for public comment drafts of supports that function. For information the Office of Management and Budget two new guides in its Regulatory Guide about the interactive rulemaking by Executive Order No. 11541 of July 1, Series. This series has been developed website, contact Ms. Carol Gallagher, 1970 (35 FR 10737), the three sets of to describe and make available to the (301) 415–5905; e-mail [email protected]. rates outlined below are hereby public such information as methods Electronic copies of these draft guides, established. These rates are for use in acceptable to the NRC staff for under Accession Numbers connection with the recovery, from implementing specific parts of the ML003714744 for DG–8026 and tortiously liable third persons, of the NRC’s regulations, techniques used by ML003714764 for DG–8027, are cost of hospital and medical care and the staff in evaluating specific problems available in NRC’s Public Electronic treatment furnished by the United States or postulated accidents, and data Reading Room, which can also be (Part 43, Chapter I, Title 28, Code of needed by the staff in its review of accessed through NRC’s web site, Federal Regulations) through three applications for permits and licenses. . For information separate Federal agencies. The rates Draft Regulatory Guide DG–1102, about the draft guides, contact Mr. J. have been established in accordance ‘‘Design, Inspection, and Testing Segala at (301) 415–1858; e-mail with the requirements of OMB Circular Criteria for Air Filtration and [email protected]. A–25, requiring reimbursement of the Adsorption Units of Post-Accident full cost of all services provided. The Although a time limit is given for rates are established as follows: Engineered-Safety-Feature Atmosphere comments on these draft guides, Cleanup Systems in Light-Water-Cooled comments and suggestions in 1. Department of Defense Nuclear Power Plants,’’ as a proposed connection with items for inclusion in The FY 2001 Department of Defense Revision 3 to Regulatory Guide 1.52, is guides currently being developed or (DoD) reimbursement rates for inpatient, being developed to describe methods improvements in all published guides outpatient, and other services are acceptable to the NRC staff for are encouraged at any time. provided in accordance with Title 10, complying with the NRC’s regulations United States Code, section 1095. Due to with regard to the design, inspection, Regulatory guides are available for size, the sections containing the Drug and testing criteria for air filtration and inspection at the Commission’s Public Reimbursement Rates (section IV.C.) iodine adsorption units of engineered- Document Room, 11555 Rockville Pike, and the rates for Ancillary Services safety-feature atmosphere cleanup Rockville, MD. Requests for single Requested by Outside Providers (section systems in light-water-cooled nuclear copies of draft or final guides (which IV.D.) are not included in this package. power plants. This guide applies only to may be reproduced) or for placement on Those rates are available from the post-accident atmosphere cleanup an automatic distribution list for single TRICARE Management Activity’s systems that are designed to mitigate the copies of future draft guides in specific Uniform Business Office website, http:/ consequences of postulated accidents. divisions should be made in writing to the U.S. Nuclear Regulatory /www.tricare.osd.mil/ebc/rm/ Draft Regulatory Guide DG–1103, Commission, Washington, DC 20555, rmlhome.html. The medical and ‘‘Design, Inspection, and Testing Attention: Reproduction and dental service rates in this package Criteria for Air Filtration and Distribution Services Section; or by fax (including the rates for ancillary Adsorption Units of Normal Ventilation to (301) 415–2289, or by email to services and other procedures requested Exhaust Systems in Light-Water-Cooled . by outside providers) are effective Nuclear Power Plants,’’ as a proposed Telephone requests cannot be October 1, 2000. Pharmacy rates are Revision 2 to Regulatory Guide 1.140, is accommodated. Regulatory guides are updated on an as needed basis. being developed to present methods not copyrighted, and Commission 2. Health and Human Services acceptable to the NRC staff for meeting approval is not required to reproduce the NRC’s regulations with regard to the them. The FY 2001 tortiously liable rates for criteria for air filtration and adsorption Indian Health Service health facilities units installed in the normal ventilation (5 U.S.C. 552(a)). are based on Medicare cost reports. The exhaust systems of light-water-cooled Dated at Rockville, Maryland, this 19th day obligations for the Indian Health Service nuclear power plants. of October 2000. hospitals participating in the cost report
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International Mili- Interagency and tary Education other Federal Other Per inpatient day and Training agency sponsored (full/third party) (IMET) patients
A. Burn Center ...... $4,144.00 $5,694.00 $6,016.00 B. Surgical Care Services (Cosmetic Surgery) ...... 1,895.00 2,604.00 2,752.00 C. All Other Inpatient Services (Based on Diagnosis Related Groups (DRG) 3.
Average FY01 Direct Care Inpatient Reimbursement Rates
Other Adjusted standard amount IMET Interagency (full/third party)
Large Urban ...... $2,986.00 $5,712.00 $6,002.00 Other Urban/Rural ...... 3,468.00 6,633.00 7,004.00 Overseas ...... 3,872.00 9,045.00 9,489.00
2. Overview care has their own ASA rate—The MTF- 3. Example of Adjusted Standardized Amounts for Inpatient Stays The FY01 inpatient rates are based on specific ASA rate is the published ASA the cost per DRG, which is the inpatient rate adjusted for area wage differences Figure 1 shows examples for a non- full reimbursement rate per hospital and indirect medical education (IME) teaching hospital (Reynolds Army discharge weighted to reflect the for the discharging hospital (see Community Hospital) in an Other intensity of the principal diagnosis, Attachment 1). The MTF-specific ASA Urban/Rural area. secondary diagnoses, procedures, rate submitted on the claim is the rate a. The cost to be recovered is the patient age, etc. involved. The average that payers will use for reimbursement military treatment facility’s cost for cost per Relative Weighted Product purposes. For a more complete medical services provided. Billings will (RWP) for large urban, other urban/ description of the development of MTF- be at the third party rate. rural, and overseas facilities will be ASAs and how they are applied refer to b. DRG 020: Nervous System Infection published annually as an inpatient the ASA Primer at http:// Except Viral Meningitis. The RWP for adjusted standardized amount (ASA) www.tricare.osd.mil/org/pae/asa— an inlier case is the CHAMPUS weight (see paragraph I.C.1., above). The ASA primer/asa—primer1.html. of 2.2244. (DRG statistics shown are will be applied to the RWP for each Overseas MTFs use the rates specified from FY 1999.) inpatient case, determined from the in paragraph I. C. 1. For providers c. The MTF-applied ASA rate is DRG weights, outlier thresholds, and performing inpatient care at a civilian $6,831 (Reynolds Army Community payment rules published annually for facility for a DoD beneficiary, see note Hospital’s third party rate as shown in hospital reimbursement rates under the Attachment 1). Civilian Health and Medical Program of 3. An example of how to apply DoD costs to a DRG standardized weight to d. The MTF cost to be recovered is the the Uniformed Services (CHAMPUS) RWP factor (2.2244) in subparagraph pursuant to 32 CFR 199.14(a)(1), arrive at DoD costs is contained in paragraph I.C.3., below. 3.b., above, multiplied by the amount including adjustments for length of stay ($6,831) in subparagraph 3.c., above. (LOS) outliers. Each large urban or other e. Cost to be recovered is $15,195. urban/rural MTF providing inpatient
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FIGURE 1.ÐTHIRD PARTY BILLING EXAMPLES
Arithmetic Geometric Short stay Long stay DRG number DRG description DRG weight mean LOS mean LOS threshold threshold
020 ...... Nervous System Infection 2.2244 8.3 5.8 1 29 Except Viral Meningitis.
Area wage IME Group MTF-applied Hospital Location rate index adjustment ASA ASA
Reynolds Army Community Hospital ...... Other urban/rural ...... 9156 1.0 $7,004 $6,831
Days Relative weighted product Patient Length of above TPC stay (days) Amount*** threshold Inlier* Outlier** Total
#1 ...... 7 0 2.2244 000 2.2244 $15,195 #2 ...... 21 0 2.2244 000 2.2244 $15,195 #3 ...... 35 6 2.2244 .7594 2.9838 $20,382 * DRG Weight ** Outlier calculation = 33 percent of per diem weight × number of outlier days = .33 (DRG Weight/Geometric Mean LOS) × (Patient LOSÐLong Stay Threshold) = .33 (2.2244/5.8) × (35±29) = .33 (.38352) × 6 (take out to five decimal places) = .12656 × 6 (carry to five decimal places) = .7594 (carry to four decimal places) *** MTF-Applied ASA × Total RWP
II. OUTPATIENT RATES [Per Visit 1,2]
International Interagency and MEPRS Clinical service military edu- other federal Other code 4 cation and train- agency spon- (full/third party) ing (IMET) sored patients
A. Medical Care: BAA ...... Internal Medicine ...... $147.00 $204.00 $216.00 BAB ...... Allergy ...... 80.00 111.00 117.00 BAC ...... Cardiology ...... 129.00 180.00 190.00 BAE ...... Diabetic ...... 105.00 146.00 154.00 BAF ...... Endocrinology (Metabolism) ...... 151.00 210.00 222.00 BAG ...... Gastroenterology ...... 183.00 255.00 269.00 BAH ...... Hematology ...... 286.00 398.00 420.00 BAI ...... Hypertension ...... 216.00 301.00 318.00 BAJ ...... Nephrology ...... 221.00 307.00 324.00 BAK ...... Neurology ...... 165.00 229.00 242.00 BAL ...... Outpatient Nutrition ...... 69.00 96.00 101.00 BAM ...... Oncology ...... 201.00 280.00 295.00 BAN ...... Pulmonary Disease ...... 186.00 259.00 273.00 BAO ...... Rheumatology ...... 139.00 194.00 205.00 BAP ...... Dermatology ...... 115.00 160.00 169.00 BAQ ...... Infectious Disease ...... 181.00 252.00 266.00 BAR ...... Physical Medicine ...... 115.00 160.00 169.00 BAS ...... Radiation Therapy ...... 169.00 235.00 248.00 BAT ...... Bone Marrow Transplant ...... 190.00 264.00 279.00 BAU ...... Genetic ...... 330.00 460.00 485.00 BAV ...... Hyperbaric ...... 344.00 480.00 506.00 B. Surgical Care: BBA ...... General Surgery ...... 215.00 299.00 316.00 BBB ...... Cardiovascular and Thoracic Surgery ...... 419.00 584.00 616.00 BBC ...... Neurosurgery ...... 249.00 347.00 366.00 BBD ...... Ophthalmology ...... 130.00 181.00 191.00 BBE ...... Organ Transplant ...... 1,106.00 1,541.00 1,625.00 BBF ...... Otolaryngology ...... 149.00 207.00 219.00 BBG ...... Plastic Surgery ...... 168.00 235.00 247.00 BBH ...... Proctology ...... 125.00 174.00 184.00 BBI ...... Urology ...... 164.00 228.00 240.00 BBJ ...... Pediatric Surgery ...... 89.00 125.00 131.00 BBK ...... Peripheral Vascular Surgery ...... 98.00 137.00 145.00 BBL ...... Pain Management ...... 138.00 193.00 203.00 BBM ...... Vascular and Interventional Radiology ...... 493.00 687.00 724.00 C. Obstetrical and Gynecological (OB±GYN) Care: BCA ...... Family Planning ...... 76.00 106.00 111.00
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II. OUTPATIENT RATESÐContinued [Per Visit 1,2]
International Interagency and MEPRS Clinical service military edu- other federal Other code 4 cation and train- agency spon- (full/third party) ing (IMET) sored patients
BCB ...... Gynecology ...... 127.00 177.00 187.00 BCC ...... Obstetrics ...... 104.00 144.00 152.00 BCD ...... Breast Cancer Clinic ...... 240.00 334.00 352.00 D. Pediatric Care: BDA ...... Pediatric ...... 92.00 128.00 134.00 BDB ...... Adolescent ...... 83.00 115.00 121.00 BDC ...... Well Baby ...... 63.00 87.00 92.00 E. Orthopaedic Care: BEA ...... Orthopaedic ...... 143.00 200.00 211.00 BEB ...... Cast ...... 89.00 123.00 130.00 BEC ...... Hand Surgery ...... 76.00 106.00 112.00 BEE ...... Orthotic Laboratory ...... 93.00 130.00 137.00 BEF ...... Podiatry ...... 80.00 112.00 118.00 BEZ ...... Chiropractic ...... 38.00 53.00 55.00 F. Psychiatric and/or Mental Health Care: BFA ...... Psychiatry ...... 165.00 230.00 242.00 BFB ...... Psychology ...... 115.00 160.00 169.00 BFC ...... Child Guidance ...... 92.00 128.00 135.00 BFD ...... Mental Health ...... 148.00 206.00 217.00 BFE ...... Social Work ...... 147.00 205.00 217.00 BFF ...... Substance Abuse ...... 141.00 197.00 208.00 G. Family Practice/Primary Medical Care: BGA ...... Family Practice ...... 107.00 149.00 157.00 BHA ...... Primary Care ...... 109.00 151.00 160.00 BHB ...... Medical Examination ...... 111.00 155.00 163.00 BHC ...... Optometry ...... 72.00 100.00 105.00 BHD ...... Audiology ...... 52.00 73.00 77.00 BHE ...... Speech Pathology ...... 122.00 170.00 180.00 BHF ...... Community Health ...... 85.00 118.00 125.00 BHG ...... Occupational Health ...... 108.00 151.00 159.00 BHH ...... TRICARE Outpatient ...... 74.00 104.00 109.00 BHI ...... Immediate Care ...... 161.00 225.00 237.00 H. Emergency Medical Care: BIA ...... Emergency Medical ...... 173.00 242.00 255.00 I. Flight Medical Care: BJA ...... Flight Medicine ...... 124.00 173.00 182.00 J. Underseas Medical Care: BKA ...... Underseas Medicine ...... 77.00 108.00 114.00 K. Rehabilitative Services: BLA ...... Physical Therapy ...... 56.00 79.00 83.00 BLB ...... Occupational Therapy ...... 75.00 104.00 110.00
III. AMBULATORY PROCEDURE VISIT (APV) [Per visit 5]
International Interagency and MEPRS Clinical service military edu- other federal Other code 4 cation and train- agency spon- (full/third party) ing (IMET) sored patients
Medical Care: BB ...... Surgical Care ...... $1,313.00 $1,829.00 $1,929.00 BE ...... Orthopaedic Care ...... 1,664.00 2,319.00 2,446.00 All Other ...... B clinics other than BB and BE, to include those B clinics where: ...... 378.00 527.00 556.00 1. There is an APU established within DoD guidelines ANDÐ 2. There is a rate established for that clinic in section II. Some B clinics, such as BF, BI, BJ and BL, perform the type of services where the es- tablishment of an APU would not be within appropriate clinical guide- lines.
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IV. OTHER RATES AND CHARGES 12
International Interagency and MEPRS Clinical service military edu- other federal Other code 4 cation and train- agency spon- (full/third party) ing (IMET) sored patients
A. Per Each: FBI ...... Immunization ...... $22.00 $31.00 $32.00 B. Family Member Rate: $11.45 (formerly Military Dependents Rate) C. Reimbursement Rates For Drugs Requested By Outside Pro- viders: 615 D. Ancillary Services Requested by an Outside ProviderÐPer Proce- dure: 715 DB ...... Laboratory procedures requested by an outside provider CPT '00 Weight 15.00 22.00 23.00 Multiplier. DC, DI ...... Radiology procedures requested by an outside provider CPT '00 Weight 79.00 115.00 120.00 Multiplier. E. Dental RateÐPer Procedure: 11 Dental Services ADA code weight multiplier ...... 73.00 112.00 117.00 F. Ambulance RateÐPer Hour: 12 FEA ...... Ambulance ...... 81.00 113.00 120.00 G. AirEvac RateÐPer Trip (24 hour period): 13 AirEvac ServicesÐAmbulatory 339.00 473.00 499.00 AirEvac ServicesÐLitter ...... 989.00 1,379.00 1,454.00 H. Observation RateÐPer hourÐ14 Observation ServicesÐHour ...... 20.00 28.00 30.00
V. ELECTIVE COSMETIC SURGERY PROCEDURES AND RATES
International classification Current proce- Amount of Cosmetic surgery procedure dural termi- FY 2001 Charge 9 diseases 8 charge (ICD±9) nology (CPT)
MammaplastyÐaugmentation ...... 85.50 19325 Inpatient Surgical Care (a) Per Diem or APV (b) 85.32 19324 85.31 19318 Mastopexy ...... 85.60 19316 Inpatient Surgical Care (a) Per Diem or APV or (b) applicable Out- (c) patient Clinic Rate Facial ...... 86.82 15824 Inpatient Surgical Care (a) Per Diem or APV (b) Rhytidectomy ...... 86.22 Blepharoplasty ...... 08.70 15820 Inpatient Surgical Care (a) Per Diem or APV or (b) applicable Out- (c) patient Clinic Rate 08.44 15821 15822 15823 Mentoplasty (Augmentation/or Reduction) ...... 76.68 21208 Inpatient Surgical Care (a) Per Diem APV or (b) applicable Out- (c) patient Clinic Rate 76.67 21209 Abdominoplasty ...... 86.83 15831 Inpatient Surgical Care (a) Per Diem or APV or (b) applicable Out- (c) patient Clinic Rate Lipectomy ...... 86.83 15876 Inpatient Surgical Care (a) Per Diem or APV or (b) applicable Out- (c) patient Clinic Rate Suction per region 10 ...... 15877 15878 15879 Rhinoplasty ...... 21.87 30400 Inpatient Surgical Care (a) Per Diem or APV or (b) applicable Out- (c) patient Clinic Rate 21.86 30410
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V. ELECTIVE COSMETIC SURGERY PROCEDURES AND RATESÐContinued
International classification Current proce- Amount of Cosmetic surgery procedure dural termi- FY 2001 Charge 9 diseases 8 charge (ICD±9) nology (CPT)
Scar Revisions beyond CHAMPUS ...... 86.84 1578l Inpatient Surgical Care (a) Per Diem or APV or (b) applicable Out- (c) patient Clinic Rate Mandibular or Maxillary Repositioning ...... 76.41 21194 Inpatient Surgical Care (a) Per Diem or APV or (b) applicable Out- (c) patient Clinic Rate Dermabrasion ...... 86.25 15780 Inpatient Surgical Care (a) Per Diem or APV or (b) applicable Out- (c) patient Clinic Rate Hair Restoration ...... 86.64 15775 Inpatient Surgical Care (a) Per Diem or APV or (b) applicable Out- (c) patient Clinic Rate Removing Tattoos ...... 86.25 15780 Inpatient Surgical Care (a) Per Diem or APV or (b) applicable Out- (c) patient Clinic Rate Chemical Peel ...... 86.24 15790 Inpatient Surgical Care (a) Per Diem or APV or (b) applicable Out- (c) patient Clinic Rate Arm/Thigh: Dermolipectomy ...... 86.83 15836/ Inpatient Surgical Care (a) Per Diem or APV (b) APV or applicable (b) Outpatient Clinic (c) Rate (e) Refractive surgery ...... 15832 Radial Keratotomy ...... 65771 Other Procedure (if applies to laser or other ...... 66999 refractive surgery) ...... Otoplasty ...... 69300 APV or applicable Out- (b) patient Clinic Rate (c) Brow Lift ...... 86.3 15839 Inpatient Surgical Care (a) Per Diem or APV or (b) applicable Out- (c) patient Clinic Rate
Notes on Cosmetic Surgery Charges be downloaded from http:// the Civilian Health and Medical Program for a Per diem charges for inpatient surgical www.tricare.osd.mil/policy/2000poli.htm. the Uniformed Services (CHAMPUS). These expenses include all direct care expenses care services are listed in section I.B. (See Notes on Reimbursable Rates notes 8 through 10, below, for further details associated with direct patient care. The 1 Percentages can be applied when on reimbursable rates.) average cost per RWP for large urban, other preparing bills for both inpatient and b Charges for ambulatory procedure visits urban/rural, and overseas will be published outpatient services. Pursuant to the (formerly same day surgery) are listed in annually as an adjusted standardized amount provisions of 10 U.S.C. 1095, the inpatient (ASA) and will include the cost of inpatient section III. (See notes 8 through 10, below, Diagnosis Related Groups and inpatient per for further details on reimbursable rates.) The professional services. The DRG rates will diem percentages are 98 percent hospital and apply to reimbursement from all sources, not ambulatory procedure visit (APV) rate is used 2 percent professional charges. The just third party payers. if the elective cosmetic surgery is performed outpatient per visit percentages are 89 MTFs without inpatient services, whose in an ambulatory procedure unit (APU). percent outpatient services and 11 percent c providers are performing inpatient care in a Charges for outpatient clinic visits are professional charges. listed in sections II.A–K. The outpatient 2 DoD civilian employees located in civilian facility for a DoD beneficiary, can bill clinic rate is not used for services provided overseas areas shall be rendered a bill when payers the percentage of the charge that in an APU. The APV rate should be used in services are performed. represents professional services as provided 1 these cases. 3 The cost per Diagnosis Related Group in above. The ASA rate used in these cases, d Charge is solely determined by the (DRG) is based on the inpatient full based on the absence of a ASA rate for the location of where the care is provided and is reimbursement rate per hospital discharge, facility, will be based on the average ASA not to be based on any other criteria. An APV weighted to reflect the intensity of the rate for the type of metropolitan statistical rate can only be billed if the location has principal and secondary diagnoses, surgical area the MTF resides, large urban, other been established as an APU following all procedures, and patient demographics urban/rural, or overseas. (see paragraph required DoD guidelines and instructions. involved. The adjusted standardized amounts I.C.1.). The Uniform Business Office must e Refer to HA Policy on Vision Correction (ASA) per Relative Weighted Product (RWP) receive documentation of care provided in Via Laser Surgery For Non-Active Duty for use in the direct care system is order to produce a bill. Beneficiaries, April 7, 2000 for further comparable to procedures used by the Health 4 The Medical Expense and Performance guidance on billing for these services. It can Care Financing Administration (HCFA) and Reporting System (MEPRS) code is a three
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An example of the Office website, http://www.tricare.osd.mil/ rate multiplied by the DoD established MEPRS hierarchical arrangement follows: ebc/rm/rmlhome.html. weight for the American Dental Association 7 The list of FY 2001 rates for ancillary (ADA) code performed. For example, for MEPRS services requested by outside providers and ADA code 00270, bite wing single film, the Code obtained at a Military Treatment Facility is weight is 0.15. The weight of 0.15 is too large to include in this document. Those multiplied by the appropriate rate, IMET, Outpatient Care (Functional Cat- B. rates are available from the TRICARE IAR, or Full/Third Party rate to obtain the egory). Management Activity’s Uniform Business charge. If the Full/Third Party rate is used, Medical Care (Summary Ac- BA. Office website, http://www.tricare.osd.mil/ then the charge for this ADA code will be count). ebc/rm/rmlhome.html. $17.55 ($117 × .15 = $17.55). Internal Medicine (Subaccount) BAA. Charges for ancillary services requested by The list of FY 2001 ADA codes and an outside provider (e.g., physicians and weights for dental services is too large to 5 Ambulatory procedure visit is defined in dentists) are relevant to the Third Party include in this document. Those rates are DoD Instruction 6025.8, ‘‘Ambulatory Collection Program. Third party payers (such available from the TRICARE Management Procedure Visit (APV),’’ dated September 23, as insurance companies) shall be billed for Activity’s Uniform Business Office website, 1996, as immediate (day of procedure) pre- ancillary services when beneficiaries who http://www.tricare.osd.mil/ebc/rm/ procedure and immediate post-procedure have medical insurance obtain services from rm_home.html. care requiring an unusual degree of intensity the MTF which are prescribed by providers 12 Ambulance charges shall be based on and provided in an ambulatory procedure external to the MTF. Laboratory and hours of service in 15 minute increments. unit (APU). An APU is a location or Radiology procedure costs are calculated by The rates listed in section IV.F. are for 60 organization within an MTF (or freestanding multiplying the DoD established weight for minutes or 1 hour of service. Providers shall outpatient clinic) that is specially equipped, the Physicians’ Current Procedural calculate the charges based on the number of staffed, and designated for the purpose of Terminology (CPT 00) code by either the hours (and/or fractions of an hour) that the providing the intensive level of care laboratory or radiology multiplier (section ambulance is logged out on a patient run. associated with APVs. Care is required in the IV.D.). Radiology procedures performed by Fractions of an hour shall be rounded to the facility for less than 24 hours. All expenses Nuclear Medicine use the same methodology next 15 minute increment (e.g., 31 minutes and workload are assigned to the MTF- as Radiology for calculating a charge because shall be charged as 45 minutes). established APU associated with the referring their workload and expenses are included in 13 Air in-flight medical care reimbursement clinic. The BB and BE APV rates are to be the establishment of the Radiology charges are determined by the status of the used only by clinics that are subaccounts multiplier. patient (ambulatory or litter) and are per under these summary accounts (see 4 for an Eligible beneficiaries (family members or patient during a 24 hour period. The explanation of MEPRS hierarchical retirees with medical insurance) are not appropriate charges are billed only by the Air arrangement). The All Other APV rate is to personally liable for this cost and shall not Force Global Patient Movement Requirement be used only by those clinics that are not a be billed by the MTF. MSA patients, who are Center (GPMRC). These charges are only for subaccount under BB or BE. In addition, APV not beneficiaries as defined by 10 U.S.C. the cost of providing medical care. Flight rates may only be utilized for clinics where 1074 and 1076, are charged at the ‘‘Other’’ charges are billed by GPMRC separately. there is a clinic rate established. For rate if they are seen by an outside provider 14 Observation Services are billed at the example, BLC, Neuromuscular Screening, no and only come to the MTF for ancillary hourly charge. Begin counting when the longer has an established rate. Therefore, an services. patient is placed in the observation bed and APU can not be defined and an APV can not 8 The attending physician is to complete round to the nearest hour. For example, if a be billed for this clinic. the CPT 00 code to indicate the appropriate patient has received one hour and 20 minutes 6 Third party payers (such as insurance procedure followed during cosmetic surgery. of observation, then you bill for one hour of companies) shall be billed for prescription The appropriate rate will be applied service. If the status of a patient changes to services when beneficiaries who have depending on the treatment modality of the inpatient, the charges for observation services medical insurance obtain medications from a patient: ambulatory procedure visit, are added to the DRG assigned to the case Military Treatment Facility (MTF) that are outpatient clinic visit or inpatient surgical and not separately billed. If a patient is prescribed by providers external to the MTF care services. released from observation status and is sent (e.g., physicians and dentists). Eligible 9 Family members of active duty personnel, to an APV, the charges for observation beneficiaries (family members or retirees retirees and their family members, and services are not billed separately but are with medical insurance) are not liable survivors shall be charged elective cosmetic added to the APV rate to recover all personally for this cost and shall not be surgery rates. Elective cosmetic surgery expenses. billed by the MTF. Medical Services Account procedure information is contained in 15 Final rule 32 CFR part 220, published (MSA) patients, who are not beneficiaries as section V. The patient shall be charged the February 16, 2000, eliminated the dollar defined in 10 U.S.C. 1074 and 1076, are rate as specified in the FY 2001 reimbursable threshold for high cost ancillary services and charged at the ‘‘Other’’ rate if they are seen rates for an episode of care. The charges for the associated term ‘‘high cost ancillary by an outside provider and only come to the elective cosmetic surgery are at the full service.’’ The phrase ‘‘high cost ancillary MTF for prescription services. The standard reimbursement rate (designated as the service’’ is replaced with the phrase cost of medications ordered by an outside ‘‘Other’’ rate) for inpatient per diem surgical ‘‘ancillary services requested by an outside provider includes the DoD-wide average cost care services in section I.B., ambulatory provider.’’ The elimination of the threshold of the drug, calculated by National Drug Code procedure visits as contained in section III., also eliminated the need to bundle costs (NDC) number. The prescription charge is or the appropriate outpatient clinic rate in whereby a patient is billed if the total cost calculated by multiplying the number of sections II.A–K. The patient is responsible for of ancillary services in a day (defined as 0001 units (e.g., tablets or capsules) by the unit the cost of the implant(s) and the prescribed hours to 2400 hours) exceeds $25.00. The cost and adding $6.00 for the cost of cosmetic surgery rate. (Note: The implants elimination of the threshold is effective as dispensing the prescription. Dispensing costs and procedures used for the augmentation per date stated in final rule 32 CFR Part 220.
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ATTACHMENT 1.ÐADJUSTED STANDARDIZED AMOUNTS (ASA) BY MILITARY TREATMENT FACILITY
Inter- DMISID MTF name Serv Full cost agency IMET TPC rate rate rate rate
0003 .... Lyster AHÐFt. Rucker ...... A ..... $6,637 $6,286 $3,286 $6,637 0004 .... 502nd Med GrpÐMaxwell AFB ...... F ..... 6,984 6,614 3,458 6,984 0005 .... Bassett ACHÐFt. Wainwright ...... A ..... 7,152 6,774 3,541 7,152 0006 .... 3rd Med GrpÐElmendorf AFB ...... F ..... 7,041 6,668 3,486 7,041 0009 .... 56th Med GrpÐLuke AFB ...... F ..... 5,986 5,697 2,978 5,986 0014 .... 60th Med GrpÐTravis AFB ...... F ..... 9,912 9,387 4,907 9,912 0018 .... 30th Med GrpÐVandenberg AFB ...... F ..... 7,035 6,663 3,483 7,035 0019 .... 95th Med GrpÐEdwards AFB ...... F ..... 7,004 6,633 3,468 7,004 0024 .... NH Camp Pendleton ...... N ..... 7,614 7,245 3,787 7,614 0028 .... NH Lemoore ...... N ..... 6,997 6,627 3,465 6,997 0029 .... NH San Diego ...... N ..... 9,744 9,273 4,847 9,744 0030 .... NH Twenty Nine Palms ...... N ..... 6,111 5,815 3,039 6,111 0032 .... Evans ACHÐFt. Carson ...... A ..... 6,946 6,578 3,439 6,946 0033 .... 10th Med GrpÐUSAF Academy ...... F ..... 6,994 6,623 3,463 6,994 0037 .... Walter Reed AMCÐ Washington DC ...... A ..... 9,010 8,574 4,482 9,010 0038 .... NH Pensacola ...... N ..... 8,939 8,465 4,426 8,939 0039 .... NH Jacksonville ...... N ..... 7,537 7,173 3,749 7,537 0042 .... 96th Med GrpÐEglin AFB ...... F ..... 8,309 7,869 4,114 8,309 0043 .... 325th Med GrpÐTyndall AFB ...... F ..... 7,002 6,631 3,467 7,002 0045 .... 6th Med GrpÐMacDill AFB ...... F ..... 5,991 5,702 2,980 5,991 0047 .... Eisenhower AMCÐFt. Gordon ...... A ..... 8,550 8,098 4,233 8,550 0048 .... Martin ACHÐFt. Benning ...... A ..... 7,987 7,564 3,954 7,987 0049 .... Winn ACHÐFt. Stewart ...... A ..... 6,644 6,292 3,289 6,644 0052 .... Tripler AMCÐFt. Shafter ...... A ..... 9,533 9,029 4,720 9,533 0053 .... 366th Med GrpÐMountain Home AFB ...... F ..... 6,982 6,612 3,457 6,982 0055 .... 375th Med GrpÐScott AFB ...... F ..... 7,625 7,256 3,793 7,625 0056 .... NH Great Lakes ...... N ..... 6,063 5,770 3,016 6,063 0057 .... Irwin AHÐFt. Riley ...... A ..... 6,521 6,176 3,229 6,521 0060 .... Blanchfield ACHÐFt. Campbell ...... A ..... 6,605 6,255 3,270 6,605 0061 .... Ireland ACHÐFt. Knox ...... A ..... 6,829 6,467 3,381 6,829 0064 .... Bayne-Jones ACHÐFt. Polk ...... A ..... 6,573 6,225 3,254 6,573 0066 .... 89th Med GrpÐAndrews AFB ...... F ..... 8,062 7,672 4,010 8,062 0067 .... NNMC Bethesda ...... N ..... 9,786 9,313 4,868 9,786 0073 .... 81st Med GrpÐKeesler AFB ...... F ..... 8,772 8,308 4,343 8,772 0075 .... Wood ACHÐFt. Leonard Wood ...... A ..... 6,539 6,193 3,237 6,539 0078 .... 55th Med GrpÐOffutt AFB ...... F ..... 8,697 8,236 4,306 8,697 0079 .... 99th Med GrpÐNellis AFB ...... F ..... 6,002 5,712 2,986 6,002 0083 .... 377th Med GrpÐKirtland AFB ...... F ..... 6,971 6,602 3,452 6,971 0084 .... 49th Med GrpÐHolloman AFB ...... F ..... 7,004 6,633 3,468 7,004 0086 .... Keller ACHÐWest Point ...... A ..... 7,296 6,909 3,612 7,296 0089 .... Womack AMCÐFt. Bragg ...... A ..... 7,817 7,403 3,870 7,817 0091 .... NH Camp LeJeune ...... N ..... 6,744 6,387 3,339 6,744 0092 .... NH Cherry Point ...... N ..... 6,788 6,429 3,361 6,788 0093 .... 319th Med GrpÐGrand Forks AFB ...... F ..... 7,032 6,660 3,482 7,032 0094 .... 5th Med GrpÐMinot AFB ...... F ..... 6,857 6,494 3,395 6,857 0095 .... 74th Med GrpÐWright-Patterson AFB ...... F ..... 10,371 9,822 5,135 10,371 0096 .... 72nd Med GrpÐTinker AFB ...... F ..... 6,001 5,711 2,985 6,001 0097 .... 97th Med GrpÐAltus AFB ...... F ..... 6,976 6,607 3,454 6,976 0098 .... Reynolds ACHÐFt. Sill ...... A ..... 6,831 6,469 3,382 6,831 0100 .... NH Newport ...... N ..... 6,002 5,712 2,986 6,002 0101 .... 20th Med GrpÐShaw AFB ...... F ..... 6,964 6,595 3,448 6,964 0103 .... NH Charleston ...... N ..... 6,879 6,514 3,406 6,879 0104 .... NH Beaufort ...... N ..... 6,871 6,507 3,402 6,871 0105 .... Moncrief ACHÐFt. Jackson ...... A ..... 6,961 6,592 3,446 6,961 0106 .... 28th Med GrpÐEllsworth AFB ...... F ..... 6,939 6,572 3,436 6,939 0108 .... Wm Beaumont AMCÐFt. Bliss ...... A ..... 8,329 7,888 4,124 8,329 0109 .... Brooke AMCÐFt. Sam Houston ...... A ..... 8,511 8,099 4,233 8,511 0110 .... Darnall AHÐFt. Hood ...... A ..... 8,606 8,151 4,261 8,606 0112 .... 7th Med GrpÐDyess AFB ...... F ..... 6,892 6,528 3,413 6,892 0113 .... 82nd Med GrpÐSheppard AFB ...... F ..... 6,903 6,537 3,418 6,903 0117 .... 59th Med WingÐLackland AFB ...... F ..... 8,640 8,222 4,297 8,640 0119 .... 75th Med GrpÐHill AFB ...... F ..... 5,983 5,693 2,976 5,983 0120 .... 1st Med GrpÐLangley AFB ...... F ..... 5,954 5,666 2,962 5,954 0121 .... McDonald ACHÐFt. Eustis ...... A ..... 5,649 5,376 2,810 5,649 0123 .... Dewitt AHÐFt. Belvoir ...... A ..... 8,237 7,839 4,097 8,237 0124 .... NH Portsmouth ...... N ..... 7,469 7,107 3,715 7,469 0125 .... Madigan AMCÐFt. Lewis ...... A ..... 11,018 10,435 5,455 11,018 0126 .... NH Bremerton ...... N ..... 8,165 7,733 4,043 8,165 0127 .... NH Oak Harbor ...... N ..... 6,283 5,979 3,125 6,283 0129 .... 90th Med GrpÐF.E. Warren AFB ...... F ..... 6,989 6,619 3,460 6,989
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ATTACHMENT 1.ÐADJUSTED STANDARDIZED AMOUNTS (ASA) BY MILITARY TREATMENT FACILITYÐContinued
Inter- DMISID MTF name Serv Full cost agency IMET TPC rate rate rate rate
0131 .... Weed ACHÐFt. Irwin ...... A ..... 7,003 6,633 3,467 7,003 0449 .... 24th Med GrpÐHoward ...... F ..... 9,489 9,045 3,872 9,489 0606 .... 95th CSHÐHeidelberg ...... A ..... 9,489 9,045 3,872 9,489 0607 .... Landstuhl Rgn MC ...... A ..... 9,489 9,045 3,872 9,489 0609 .... 67th CSHÐWurzburg ...... A ..... 9,489 9,045 3,872 9,489 0612 .... 121st Gen HospÐSeoul ...... A ..... 9,489 9,045 3,872 9,489 0615 .... NH Guantanamo Bay ...... N ..... 9,489 9,045 3,872 9,489 0616 .... NH Roosevelt Roads ...... N ..... 9,489 9,045 3,872 9,489 0617 .... NH Naples ...... N ..... 9,489 9,045 3,872 9,489 0618 .... NH Rota ...... N ..... 9,489 9,045 3,872 9,489 0620 .... NH Guam ...... N ..... 9,489 9,045 3,872 9,489 0621 .... NH Okinawa ...... N ..... 9,489 9,045 3,872 9,489 0622 .... NH Yokosuka ...... N ..... 9,489 9,045 3,872 9,489 0623 .... NH Keflavik ...... N ..... 9,489 9,045 3,872 9,489 0624 .... BH Sigonella ...... N ..... 9,489 9,045 3,872 9,489 0633 .... 48th Med GrpÐRAF Lakenheath ...... F ..... 9,489 9,045 3,872 9,489 0635 .... 39th Med GrpÐIncirlik AB ...... F ..... 9,489 9,045 3,872 9,489 0638 .... 51st Med GrpÐOsan AB ...... F ..... 9,489 9,045 3,872 9,489 0639 .... 35th Med GrpÐMisawa ...... F ..... 9,489 9,045 3,872 9,489 0640 .... 374th Med GrpÐYokota AB ...... F ..... 9,489 9,045 3,872 9,489 0805 .... 52nd Med GrpÐSpangdahlem ...... F ..... 9,489 9,045 3,872 9,489 0808 .... 31st Med GrpÐAviano ...... F ..... 9,489 9,045 3,872 9,489
2. Department of Health and Human application with the Securities and continued registration under section Services Exchange Commission (‘‘Commission’’), 12(g) of the Act.3 For the Department of Health and pursuant to section 12(d) of the Any interested person may, on or Human Services, Indian Health Service, Securities Exchange Act of 1934 before November 16, 2000, submit by (‘‘Act’’) 1 and Rule 12d2–2(d) effective October 1, 2000 and thereafter: letter to the Secretary of the Securities thereunder,2 to withdraw its Common and Exchange Commission, 450 Fifth Hospital Care Inpatient Day Stock, $.001 par value (‘‘Security’’), Street, NW., Washington, DC 20549– General Medical Care from listing and registration on the American Stock Exchange LLC 0609, facts bearing upon whether the Alaska—$1,837 (‘‘Amex’’). application has been made in Rest of the United States—$1,357 The Amex halted trading in the accordance with the rules of the Amex and what terms, if any, should be Outpatient Medical Treatment Security on September 8, 2000, because of concerns about the company’s ability imposed by the Commission for the Outpatient Visit to meet the Amex’s continued listing protection of investors. The Alaska—$337 maintenance requirements. As a result Commission, based on the information Rest of the United States—$189 of preliminary discussions held with the submitted to it, will issue an order For the period beginning October 1, Amex, the Company determined to granting the application after the date 2000, the rates prescribed herein voluntarily withdraw its Security from mentioned above, unless the superceded those established by the listing and registration on the Amex and Commission determines to order a Director of the Office of Management to arrange for its quotation in the hearing on the matter. unlisted over-the-counter market. As of and Budget, November 1, 1999 (64 FR For the commission, by the Division of the date on which the Company filed its 58862). Market Regulation, pursuant to delegated application with the Commission, the authority. 4 Jacob J. Lew, Company had not effected a new listing Director, Office of Management and Budget. or quotation for its Security. The Jonathan K. Katz, [FR Doc. 00–27726 Filed 10–30–00; 8:45 am] Company has stated in its application Secretary. BILLING CODE 3110±01±P that its Board of Directors has [FR Doc. 00–27912 Filed 10–03–00; 8:45 am] authorized the Company to take actions BILLING CODE 8010±01±M necessary to become quoted in the SECURITIES AND EXCHANGE unlisted over-the-counter market. COMMISSION The Company has stated in its application that it has complied with Issuer Delisting; Notice of Application the rules of the Amex governing the To Withdraw From Listing and withdrawal of its Security and that its Registration; (CyberSentry, Inc., application relates solely to the Common Stock, $.001 Par Value) File withdrawal of the Security from listing No. 1±15871 and registration on the Amex and shall have no effect upon the Security’s October 25, 2000. CyberSentry, Inc., a Delaware 1 15 U.S.C. 78l(d). 3 15 U.S.C. 78l(g). corporation (‘‘Company’’), has filed an 2 17 CFR 240.12d2–2(d). 4 17 CFR 200.30–3(a)(1).
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SECURITIES AND EXCHANGE Brooklyn Power, Inc., Armstrong Energy Commission extend the duration of the COMMISSION Corporation, GPU Power, Inc., Previous Authorizations through June Guaracachi America, Inc., EI 30, 2004. [Release No. 35±27260] Barranquilla, Inc., Barranquilla Lease American Electric Power Co., et al. (70– Holdings, Inc., EI International, Los Filings Under the Public Utility Holding 8205) Company Act of 1935, as Amended Amigos Leasing Company, Ltd., GPUI American Electric Power Company, (``Act'') Colombia, Ltda., International Power Advisors, Inc., Hanover Energy Inc. (‘‘AEP’’), a registered holding October 24, 2000. Corporation, Austin Cogeneration company, Central and South West Notice is hereby given that the Corporation, Austin Cogeneration Corporation (‘‘CSW’’), a registered following filing(s) has/have been made Partners, L.P., GPU Power Philippines, holding company that is a wholly with the Commission pursuant to GPU International Asia, Inc., GPU owned subsidiary of AEP, and CSW provisions of the Act and rules Power Ireland, Inc., EI Brooklyn Energy, Inc. (‘‘CSW Energy’’), a wholly promulgated under the Act. All Investments Limited, and GPU owned non-utility subsidiary of CSW, interested persons are referred to the Mississippi Energy, Inc., all located at all located at 1 Riverside Plaza, application(s) and/or declaration(s) for One Upper Pond Road, Parsippany, Columbus, Ohio 43215, have filed a complete statements of the proposed New Jersey 07054, have filed a post- post-effective amendment to their transaction(s) summarized below. The effective amendment under sections application under section 12(b) of the application(s) and/or declaration(s) and 6(a), 7, 12(b), 32, and 33 of the Act and Act and rule 45(a) under the Act. any amendment(s) is/are available for rule 45(a) under the Act to a previously By order dated November 28, 1995 public inspection through the filed application-declaration. (HCAR No. 26416), the Commission Commission’s Branch of Public By orders dated November 16, 1995 authorized CSW and CSW Energy to Reference. (HCAR No. 26409), June 14, 1995 issue letters of credit, bid bonds or Interested persons wishing to (HCAR No. 26307), December 28, 1994 guarantees (collectively, ‘‘Guarantees’’) comment or request a hearing on the (HCAR 26205), September 12, 1994 in connection with the development of application(s) and/or declaration(s) (HCAR No. 26123), December 18, 1992 qualifying cogeneration facilities, should submit their views in writing by (HCAR No. 25715), and June 26, 1990 qualifying small power production November 20, 2000, to the Secretary, (HCAR No. 25108) (collectively, ‘‘Prior facilities and independent power Securities and Exchange Commission, Orders’’), GPUI is authorized to engage facilities (‘‘Facilities’’), including Washington, D.C. 20549–0609, and in preliminary project development and exempt wholesale generators as defined serve a copy on the relevant applicant(s) administrative activities (‘‘Project in section 32(e) of the Act, in an and/or declarant(s) at the address(es) Activities’’) for its investments in aggregate amount not to exceed $75 specified below. Proof of service (by qualifying facilities, exempt wholesale million (‘‘Guarantee Limit’’). affidavit or, in the case of an attorney at generators (‘‘EWGs’’), and foreign utility Applicants now request authority to law, by certificate) should be filed with companies (‘‘FUCOs’’). Under the terms issue Guarantees through March 31, the request. Any request for hearing of the Prior Orders, GPU is authorized 2006 in amounts that would not, in the should identify specifically the issues of to provide guarantees and other forms of aggregate, exceed the Guarantee Limit. facts or law that are disputed. A person credit support in connection with the Applicants state that this expanded who so requests will be notified of any obligations of GPUI or its subsidiaries, authority is necessary to enable AEP, hearing, if ordered, and will receive a guarantee the securities and other CSW, CSW Energy and other AEP copy of any notice or order issued in the obligations of EWGs and FUCOs, and subsidiaries to continue and to diversify matter. After November 20, 2000, the assume the liabilities of these entities the development program with respect application(s) and/or declaration(s), as (collectively, ‘‘GPU Authority’’). The to Facilities. filed or as amended, may be granted GPU Authority is for an aggregate GPU, Inc., et al. (70–8593) and/or permitted to become effective. amount of up to $500 million. By order dated December 22, 1997 GPU, Inc. (‘‘GPU’’), a registered GPU, Inc., et al. (70–7727) (HCAR No. 26802) (‘‘1997 Order’’), holding company, its nonutility GPU, Inc. (‘‘GPU’’), a registered GPUI is authorized to provide subsidiaries GPU Service, Inc., GPU holding company located at 300 guarantees and assume liabilities of Capital, Inc., GPU Electric, Inc., Victoria Madison Avenue, Morristown, New EWGs and FUCOs (collectively, ‘‘GPUI Electric Holdings, Inc., El UK Holdings, Jersey 07960, GPU International, Inc. Authority’’) in an aggregate amount of Inc., Avon Energy Partners Holdings, (‘‘GPUI’’), a non-utility subsidiary of up to $150 million (‘‘GPUI Limit’’). In Avon Energy Partners plc, GPU GPU, and its nonutility subsidiaries addition, GPUI subsidiaries that are not Australia Holding, Inc., Austran Elmwood Energy Corporation, Geddes II EWGs or FUCOs are authorized, under Holdings, Inc., VicGas Holdings, Inc., Corporation, Geddes Cogeneration the terms of the 1997 Order, to GPU Argentina Holdings, Inc., GPU Corporation, EI Selkirk, Inc., EI Canada guarantee obligations of their direct or Argentina Services Ltd., GPU Holding Limited, EI Services Canada indirect subsidiaries (‘‘GPUI International Australia Pty Ltd., and Limited, EI Brooklyn Power Limited, Subsidiaries’ Authority’’). The GPUI GPU Brasil, Inc., all located at 300 NCP Energy, Inc., NCP Lake Power Inc., Authority and the GPUI Subsidiaries’ Madison Avenue, Morristown, New NCP Gem, Inc., Lake Investment, L.P., Authority are for guarantees and other Jersey 07960; GPU’s public utility NCP Pasco, Inc., NCP Dade Power, Inc., credit support arrangements not exempt subsidiaries, Jersey Central Power & Dade Investment, L.P., NCP Houston under rules 45 and 52 under the Act, Light Company, Metropolitan Edison Power, Inc., NCP Perry Inc., NCP New and the GPUI Subsidiaries’ Authority is Company, and Pennsylvania Electric York Inc., GPU Generation Services— subject to the GPUI Limit. Company (collectively, ‘‘Applicants’’), Pasco, Inc., GPU Generation Services— The GPU Authority, GPUI Authority, whose mailing address is P.O. Box Lake, Inc., GPUI Lake Holdings, Inc., EI and GPUI Subsidiaries’ Authority 16001, Reading, Pennsylvania 19640; Fuels Corporation, EI Services, Inc., (collectively, ‘‘Previous and GPU International, Inc., El Services, NCP Ada Power, Inc., NCP Commerce Authorizations’’) expire on December Inc., Geddes II Corporation, Geddes Power, Inc., Umatilla Groves, Inc., NCP 31, 2000. Applicants request that the Cogeneration Corporation, El Selkirk,
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Inc., El Canada Holding Limited, El For the Commission, by the Division of SECURITIES AND EXCHANGE Brooklyn Power Limited, El Services Investment Management, under delegated COMMISSION Canada Limited, NCP Houston Power, authority. Inc., NCP Perry, Inc., GPU Power, Inc., Margaret H. McFarland, [Release No. 34±43468; File No. SR±Amex± Guaracachi America, Inc., El Deputy Secretary. 00±23] Barranquilla, Inc., Barranquilla Lease [FR Doc. 00–27859 Filed 10–30–00; 8:45 am] Holdings, Inc., El International, Los Self Regulatory Organizations; Notice BILLING CODE 8010±01±M Amigos Leasing Company, Ltd., GPUI of Filing of Proposed Rule Change by Colombia, Ltda., International Power the American Stock Exchange LLC Advisors, Inc., Hanover Energy Relating to Member Firm Transactions SECURITIES AND EXCHANGE With Exchange Employees Corporation, Austin Cogeneration COMMISSION Corporation, Austin Cogeneration October 20, 2000. Partners, L.P., GPU Power Philippines, Sunshine Act Meeting Pursuant to section 19(b)(1) of the GPU International Asia, Inc., and GPU Securities Exchange Act of 1934 Power Ireland, Inc., all nonutility Notice is hereby given, pursuant to (‘‘Act’’),1 and Rule 19B–4 thereunder,2 subsidiaries of GPU, all located at One the provisions of the Government in the notice is hereby given that on April 13, Upper Pond Road, Parsippany, New Sunshine Act, Pub. L. 94–409, that the 2000, the American Stock Exchange LLC Jersey 07960, have filed a post-effective Securities and Exchange Commission (‘‘Amex’’ or ‘‘Exchange’’) filed with the amendment under sections 6(a), 7, 9(a), will hold the following meeting during Securities and Exchange Commission 10, 12, 32, and 33 of the Act and rules the week of October 30, 2000. (‘‘Commission or SEC’’) the proposed 43, 45, and 54 under the Act to a rule change as described in Items I, II, previously filed declaration-application. A closed meeting will be held on Thursday, November 2, 2000 at 11 a.m. and III below, which Items have been GPU is currently authorized by order prepared by the Exchange. On dated December 22, 1997 (HCAR No. Commissioners, Counsel to the September 25, 2000, the Amex filed 26800) (‘‘Prior Order’’) to finance Commissioners, the Secretary to the Amendment No. 1 to the proposal.3 The investments, through December 31, Commission, and recording secretaries Commission is publishing this notice to 2000 (‘‘Authorization Period’’), of up to will attend the closed meeting. Certain solicit comments on the proposed rule 100% of its consolidated retained staff members who have an interest in change, as amended, from interested earnings in exempt wholesale generators the matters may also be present. persons. and foreign utility companies 1 The General Counsel of the I. Self-Regulatory Organization’s (collectively, ‘‘Exempt Entities’’), and Commission, or his designee, has in other subsidiaries that are not Exempt Statement of the Terms of Substance of certified that, in his opinion, one or Entities, but are exclusively engaged, the Proposed Rule Change. more of the exemptions set forth in 5 directly or indirectly, in the business of The Exchange is proposing to amend U.S.C. 552b(c)(4), (8), (9)(A) and (10) owning and holding ownership interests Amex rules relating to member firm in Exempt Entities and of engaging in and 17 CFR 200.402(a)(4), (8), (9)(A) and transactions with Exchange employees. related project development activities (10), permit consideration for the proposed new language is italicized, (‘‘Project Parents’’).2 The Commission scheduled matters at the closed meeting. proposed deletions are in brackets. also authorized Project Parents in the The subject matters of the closed * * * * * Prior Order to guarantee or assume meeting scheduled Thursday, November liabilities with respect to securities 2, 2000 will be: Rule 416. [Accounts of Employees of Exchange and Members] issued by, or other obligations of, their • Institution and settlement of direct or indirect subsidiaries through injunctive actions; and Member Employee Transactions with the Authorization Period,3 to the extent • Another Member Organization these guarantees are not exempt under Institution and settlement of rules 45 and 52 under the Act, in an administrative proceedings of an No member or member organization aggregate amount outstanding at any enforcement nature shall open a cash or margin account or execute any transaction in securities or one time not to exceed $1 billion. At times, changes in Commission commodities in which an employee of Applicants seek to extend the priorities require alterations in the [the Exchange or of any corporate Authorization Period to engage in these scheduling of meeting items. For further subsidiary of the Exchange or of any] transactions until June 30, 2003. information and to ascertain what, if another is directly or indirectly any, mattes have been added, deleted or interested without the prior written 1 Investments in Exempt Entities may take the postponed, please contact: consent of the employer. Where such form of: guarantees of indebtedness or other obligations of Exempt Entities; assumptions of The Office of the Secretary at (202) prior consent has been obtained, liability of Exempt Entities; and guarantees and 942–7070. duplicate confirmations and account letter of credit reimbursement agreements in statements shall be sent to the employer. Dated: October 25, 2000. support of equity contribution obligations or Commentary otherwise in connection with project development Jonathan G. Katz, activities of Exempt Entities. Secretary. 2 Investments in Project Parents may take the 1 15 U.S.C. 78s(b)(1). form of cash capital contributions or open account [FR Doc. 00–27987 Filed 10–27–00; 11:13 2 17 CFR 240.19b–4. advances; promissory notes; guarantees of the am] 3 Letter from Bruce Ferguson, Associate General principal of or interest on promissory notes or other BILLING CODE 8010±01±M Counsel, Legal & Regulatory policy, Amex, to Jack evidence of indebtedness or obligations of a Project Drogin, Assistant Director, Division of Market Parent; undertakings to contribute equity to a Regulation, Commission, September 25, 2000 Project Parent; and assumptions of a Project (‘‘Amendment No. 1’’). Amendment No. 1 made a Parent’s liability. revision to the text of Amex Rule 417(c) to remove 3 These guarantees include support instruments a specific reference to the Code of Conduct of the or bank letter of credit reimbursement agreements National Association of Securities Dealers, Inc. or similar instruments or undertakings. (‘‘NASD’’).
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[.01 Employees of Exchange—An [Amendment. business gifts or courtesies to Exchange employee of the Exchange, who wishes July 29, 1965, effective August 16, employees other than to the extent to open a securities or commodities 1965.] Exchange employees are permitted to account shall apply for permission from [Commentary] accept such gifts and courtesies under the Human Resources Department of the [.01 Gratuity Defined.—A gratuity is the Code of Conduct applicable to Exchange.] a gift of any nature. Pursuant to Exchange employees. Records of all gifts [.02] .01 The requirement to send Exchange policy, however, gratuities and courtesies shall be kept and duplicate conformations and statements valued at $50 or less in total to any one retained by the member or member shall be as stated in Commentary .02 to person during a calendar year are organization for the period specified in Rule 415. considered an exception to Rule 348, SEC Rule 17a–4. Amendments. and prior written approval of the March 3, 1954. II. Self-Regulatory Organization’s Exchange is not required.] Statement of the Purpose of, and December 9, 1993. [.02 Records.—Records must be May 16, 1995. Statutory Basis for, the Proposed Rule retained by members and member Change * * * * * organizations as to any gratuity as Rule 15. Loans by [Exchange Officers] required by Commentary 2 to Rule 347 In its filing with the Commission, the Members above.] Exchange included statements [.03 Obtaining Written Approval.— concerning the purpose of, and basis for, Without the prior approval of the Requests for approval of any the proposed rule change and discussed Board of Governors, (i) no member, employment or gratuity under Rule 348 any comments it received on the member organization, approved person, should be directed to the Secretary’s proposed rule change. The text of these employee or any employee or any Office.] statements may be examined at the employee pension, retirement or similar [Amendments. places specified in Item IV below. The plan of any member organization Adopted July 29, 1965, effective August Exchange has prepared summaries, set (‘‘Member’’) shall directly or indirectly 16, 1965. forth in Sections A, B, and C below, of make any loan of money or securities to, December 14, 1977.] the most significant aspects of such or obtain any such loan from, any statements. member of the Board of Governors, any * * * * * member of any committee of the Rule 417. Transactions Involving A. Self-Regulatory Organization’s Exchange, or any Trustee of the Gratuity Exchange Employees Statement of the Purpose of, and Fund (‘‘Designated Person’’) and (ii) no Statutory Basis for, the Proposed Rule [member of the Board of Governors or of (a) When a member or member Change organization has actual notice that an any committee of the Exchange, no 1. Purpose Trustee of the Gratuity Fund and no Exchange employee has a financial officer or employee of the Exchange] interest in, or controls trading in, an In 1998, the Amex completed a Such Designated Person shall directly or account, the member or member transaction pursuant to which it joined indirectly make any such loan [of organization shall promptly obtain and the family of companies headed by the money or securities] to, or obtain any implement an instruction from the NASD. The American Stock Exchange, such loan form, any [member, member Exchange employee directing that Inc. transferred substantially all of its organization, approved person, duplicate account statements be assets and liabilities to the American employee or any employee pension, provided by the member or member Stock Exchange LLC, a new limited retirement or similar plan of any organization to the Exchange. liability company controlled by the member organization] Member, unless (b) No member or member NASD.4 The Exchange therefore such loan be: organization shall directly or indirectly proposes to amend its rules relating to (a) Fully secured by readily make any loan of money or securities to member firm transactions with marketable collateral, or any Exchange employee; provided, Exchange employees so that they (b) Made by a Governor, committee however, that this prohibition does not conform with the NASD Code of member of Trustee to, or obtained by a apply to loans made in the context of Conduct. Specifically, the Exchange Governor, committee member or Trustee disclosed, routine banking and proposes to amend Amex Rule 15 from, the member organization of which brokerage agreements, or loans that are (Loans by Exchange Officers) and Amex he is a member or employee or a clearly motivated by a personal or rule 416 (Accounts of Employees of member or employee therein or a party family relationship. Exchange and Members), to delete to a registered joint account in which (c) No member or member Amex Rule 348 (Gratuities to Employees such Governor, committee member or organization shall directly or indirectly of Exchange), and to add new Amex Trustee participates. give, or permit to be given, anything of Rule 417 (Transactions Involving Amendments. more than nominal value to any Exchange Employees).5 September 6, 1962. Exchange employee who has a. Member Loans to Exchange June 1, 1970. responsibility for a regulatory matter Employees. The NASD and Amex * * * * * that involves the member or member employees from accepting loans from organization. For purposes of this members, issuers, or any person with [Rule 348. Gratuities to Employees of subsection, the term ‘‘regulatory matter’’ whom the NASD or Amex transacts Exchange] includes, but is not limited to, [No member or member organization examinations, disciplinary proceedings, 4 See Letter, from James F. Duffy, Executive Vice may, without the prior written approval membership applications, listing President and General Counsel, Legal and of the Exchange, employ or give any applications, delisting proceedings, and Regulatory Policy, Amex, to Lori Richards, Director, compensation or gratuity to any dispute resolution proceedings that Office of Compliance Inspections and Examinations (‘‘OCIE’’), Commission, February 5, 1999. employee of the Exchange or any involve the member or member 5 The NASD has filed a proposed rule change to employee of any corporate subsidiary of organization. Members and member adopt a new rule very similar to new Amex Rule the Exchange.] organizations may not otherwise give 471 (SR–NASD–00–50).
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Commentary .01 to Amex Rule 416 At least once each quarter, department The SEC staff has recommended that currently requires members to obtain heads are required to review all gifts the Amex adopt a rule expressly the Exchange’s prior written approval reported by their staffs.13 prohibiting members from making loans before opening an account for an To conform Amex rules to the NASD to Amex employees, outside routine Exchange employees and to provide Code of Conduct, Amex Rule 348 brokerage or banking relationships.7 The duplicate confirmations and statements (Gratuities to Employees of Exchange) SEC’s recommendation resulted from an to the Exchange. To conform Amex will be deleted and replaced with new OCIE examination of the ethical conduct rules to the NASD Code of Conduct, the Amex Rule 417(c), a provision that and conflicts of interest rules, policies, Exchange approval requirement for the parallels the NASD Code of Conduct. and procedures of the Exchange. The opening of accounts and the Under paragraph (c) of new Amex Rule SEC staff report noted a 1996 incident requirement to furnish duplicate 417, members are permitted to give non- in which an Amex member made a confirmations are being deleted. The cash business gifts with an aggregate $70,000 loan to an Amex floor requirements to provide duplicate annual value of $100 to Exchange employee. When the Amex through its statements to the Exchange is being employees when no conflict of interest own internal procedures became aware retained. The Amex also proposes to exists, but members are prohibited from of the loan, it promptly terminated the adopt new Amex Rule 417(a), which giving business gifts or courtesies of employees for violating its conflict of provides that when a member has actual more than nominal value to any interest policies in accepting the loan. notice that an Exchange employee has a Exchange employee who has The SEC staff has stated that rules of financial interest in an account or responsibility for a specific regulatory self-regulatory organizations (‘‘SROs’’) controls trading in an account, duplicate matter that involves the member. A should explicitly prohibit SRO members account statements shall be provided by ‘‘regulatory matter’’ would include such from extending loans to SRO the member to the Exchange. matters as examinations, disciplinary 8 employees. The Amex believes that the proceedings, membership applications, The Amex therefore proposes to elimination of the Amex approval listing applications, delisting amend Amex Rule 15 to expressly requirement for the opening of proceedings, and dispute resolution provide that no member shall make a employee accounts will substantially proceedings involving the member. The loan to an Exchange employee without lessen the NASD’s administrative proposed rule would permit members to prior approval of the Amex Board of burden with respect to these accounts. give items of nominal value to Governors. Paragraph (b) of new Amex The Amex represents that the proposed employees responsible for regulatory Rule 417(b) would prohibit members rule change will simply require matters affecting the member. The Amex from making loans to Exchange employees to obtain a duplicate represents that, for example, a member employees outside of disclosed, routine instruction form (available on OASIS, would be permitted to offer minor banking and brokerage agreements. the NASD’s Intranet), complete and sign refreshments, such as a soft drink or Consistent with existing Code of the form, and provide it to the broker/ coffee, to Amex employees conducting Conduct provisions, the prohibition on dealer at which the employee has, or an on-site examination. member loans to Exchange employees in wishes to open, an account. The new Amex Rule 417(b) would not apply provision of duplicate statements by the 2. Statutory Basis to loans that are clearly motivated by a member would allow the NASD to then The Exchange believes that the family or personal relationship. Thus, properly monitor trading in employee proposed rule change is consistent with for example, a registered representative accounts. section 6(b) of the Act 14 in general, and would not be precluded from making a c. Member Gifts to Exchange furthers the objectives of section personal loan to an adult child who Employees. Currently under Amex Rule 6(b)(5) 15 in particular, in that it is works at the Amex. 348, Amex members must obtain b. Brokerage Accounts of Exchange designed to prevent fraudulent and approval from the Corporate Secretary’s manipulative acts and practices. Employees. The NASD Code of conduct Office before giving an Exchange requires disclosure of all security and employee gifts valued at over $50 per B. Self-Regulatory Organization’s commodity accounts that an employee year. The Secretary’s Office does not Statement on Burden or Competition maintains and accounts in which an approve gifts that exceed the $50 C. Self-Regulatory Organizations employee has a financial interest or threshold for employees in the Statement on Comments on the controls trading.9 Employees are Exchange’s Member Firm Regulation Proposed Rule Change Received From required to instruct the institutions area. Members, Participants, or Others where such accounts are maintained to There is no pre-approval mechanism provide duplicate account statements under the NASD Code of Conduct.10 The Exchange did not solicit or (but not confirmations) to the NASD Employees are prohibited from receive written comments on the Office of General Counsel, which accepting any business gifts, including proposed rule change. cash or cash equivalents (e.g., gift 6 NASD Code of Conduct, Section IX, Paragraph certificates) and gifts of tickets (e.g., 11 NASD Code of Conduct, Section IX, Paragraph C.3. tickets to a sporting event), from any C. 7 See Letter from Lori Richards, Director, OCIE, 12 NASD Code of Conduct, Section IX, Paragraph Commission, to Richard Syron, Chairman and Chief NASD or Amex member, Nasdaq or B.1. Executive Officer, Amex, November 6, 1998. Amex issuer, or any person or entities 13 NASD Code of Conduction, Section IX, 8 Id. Interpretation 3. 9 NASD Code of Conduct, Section VIII, Paragraph 10 NASD Code of Conduct, Section IX, Paragraph 14 15 U.S.C. 78f(b). C. B.1. 15 15 U.S.C. 78f(b)(5).
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III. Date of Effectiveness of the ACTION: Notice of meeting. With this notice, the Trade Policy Staff Proposed Rule Change and Timing for Committee (TPSC) is requesting Commission Action SUMMARY: The Industry Functional interested parties to assist it in Advisory Committee for Customs Within 35 days of the date of identifying significant barriers to U.S. Matters will hold a meeting on exports of goods, services and overseas publication of this notice in the Federal November 9, 2000, from 9:30 a.m. to 1 Register or within such longer period (i) direct investment for inclusion in the p.m. The meeting will be closed to the NTE. Particularly important are as the Commission may designate up to public from 9:30 a.m. to 12 noon, and 90 days of such date if it finds such impediments materially affecting the opened to the public from 12 noon to 1 actual and potential financial longer period to be appropriate and p.m. publishes its reasons for so finding or performance of an industry sector. The (ii) as to which the Exchange consents, DATES: The meeting is scheduled for TPSC invites written comments that the Commission will: November 9, 2000, unless otherwise provide views relevant to the issues to (A) By order approve such proposed notified. be examined in preparing the NTE. rule change, or ADDRESSES: The meeting will be held at DATES: Public comments are due not (B) Institute proceedings to determine the Department of Commerce, Room later than November 27, 2000. whether the proposed rule change B841B, located at 14th Street and ADDRESSES: Gloria Blue, Executive should be disapproved. Constitution Avenue, NW., Washington, Secretary, Trade Policy Staff Committee, IV. Solicitation of Comments DC, unless otherwise notified. Office of the United States Trade FOR FURTHER INFORMATION CONTACT: Dan Representative, 600 17th Street NW., Interested persons are invited to Gardner, (202) 482–3681 and Katherine Room 122, Washington, DC 20508. submit written data, views, and arguments concerning the foregoing, Wiehagen (202) 482–0357, Department FOR FURTHER INFORMATION CONTACT: including whether the proposed rule of Commerce, 14th Street and Gloria Blue, Office of Policy change, as amended, is consistent with Constitution Avenue, NW., Washington, Coordination, Office of the United the Act. Persons making written DC 20230, or Dominic Bianchi, Office of States Trade Representative, (202) 395– submissions should file six copies the U.S. Trade Representative, 1724 F 3475. thereof with the Secretary, Securities Street, NW., Washington, DC 20508, SUPPLEMENTARY INFORMATION: Last year’s and Exchange Commission, 450 Fifth (202) 395–6120. report may be found on USTR’s Internet Street, NW., Washington, DC 20549– SUPPLEMENTARY INFORMATION: During the Home Page (www.ustr.gov) under the 0609. Copies of the submission, all opened portion of the meeting the U.S. section on Reports. In order to ensure subsequent amendments, all written Customs Entry Revision Project (ERP) compliance with the statutory mandate statements with respect to the proposed will be discussed by representatives for reporting foreign trade barriers that rule change that are filed with the from the U.S. Customs Service and the are significant, we will focus Commission, and all written Bureau of the Census. The ERP was particularly on those restrictions where communications relating to the introduced by the Customs Service in there has been active private sector proposed rule change between the 1999 as a proposal to change U.S. interest. Commission and any person, other than customs laws and make them more The information submitted should those that may be withheld from the consistent with current business relate to one or more of the following public in accordance with the practices and promote effective ten categories of foreign trade barriers: provisions of 5 U.S.C. 552, will be compliance. This discussion is an (1) import policies (e.g., tariffs and available for inspection and copying at opportunity for the Industry Functional other import changes, quantitative the Commission’s Public Reference Advisory Committee for Customs restrictions, import licensing, and Room. Matters to be briefed and invite customs barriers); Copies of such filing will also be comments on ERP progress to date. (2) standards, testing, labeling, and available for inspection and copying at certification (including unnecessarily the principal office of the Exchange. All Dominic Bianchi, restrictive application of phytosanitary submissions should refer to File No. Acting Assistant United States Trade standards, refusal to accept U.S. SR–Amex–00–23 and should be Representative for Intergovernmental Affairs manufacturers’ self-certification of and Public Liaison. submitted by November 21, 2000. conformance to foreign product [FR Doc. 00–27861 Filed 10–30–00; 8:45 am] standards, and environmental For the Commission, by the Division of BILLING CODE 3190±01±M Market Regulation, pursuant to delegated restrictions); authority. 16 (3) government procurement (e.g., ‘‘but national’’ policies and closed Margaret H. McFarland, OFFICE OF THE UNITED STATES Deputy Secretary. bidding); TRADE REPRESENTATIVE (4) export subsidies e.g., export [FR Doc. 00–27860 Filed 10–30–00; 8:45 am] financing on preferential terms and BILLING CODE 8010±01±M Request for Public Comment With Respect to the Annual National Trade agricultural export subsidies that Estimate Report on Foreign Trade displace U.S. exports in third country Barriers markets); OFFICE OF THE UNITED STATES (5) lack of intellectual property TRADE REPRESENTATIVE AGENCY: Office of the United States protection e.g., inadequate patent, Notice of Meeting of the Industry Trade Representative. copyright, and trademark regimes); (6) services barriers e.g., limits on the Functional Advisory Committee for ACTION: Notice. range of financial services offered by Customs Matters (IFAC±1) SUMMARY: Pursuant to section 303 of the foreign financial institutions, regulation AGENCY: Office of the United States Trade and Tariff Act of 1984, as of international data flows, restrictions Trade Representative. amended, USTR is required to publish on the use of data processing, quotas on annually the National Trade Estimate imports of foreign films, and barriers to 1 17 CFR 200.30–3(a)(12). Report on Foreign Trade Barriers (NTE). the provision of services by
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A justification as to why the Attendance is open to the interested performance requirements, and information contained in the public but limited to space availability. retrictions on repatriation of earnings, submission should be treated With the approval of the co-chairmen, capital, fees and royalties); confidentially must be included in the members of the public may present oral (8) anticompetitive practices with submission. In addition, any statements at the meeting. Persons trade effects tolerated by foreign submissions containing business wishing to present statements or obtain governments (including anticompetitve confidential information must be clearly information should contact the RTCA activities of both state-owned and marked ‘‘Confidential’’ at the top and Secretariat, 1140 Connecticut Avenue, private firms that apply to services or to bottom of the cover page (or letter) and NW., Suite 1020, Washington, DC goods and that retrict the sale of U.S. of each succeeding page of the 20036; (202) 833–9339 (phone); (202) products to any firm, not just to foreign submission. The version that does not 833–9434 (fax); or http://www.rtca.org firms that perpetuate the practices); contain confidential information should (web site). Members of the public may (9) trade restrictions affecting also be clearly marked, at the top and present a written statement to the electronic commerce e.g., taraiff and bottom of each page, ‘‘public version’’ or committee at any time. non-tariff measures, burdensome and ‘‘non-confidential.’’ Issued in Washington, DC, on October 23, discrimiantory regulations and Written comments submitted in standards, discriminatory taxation); and 2000. connection with this request, except for Janice L. Peters, (10) other barriers i.e., barriers that information granted ‘‘business Designated Official. encompass more than one category, e.g., confidential’’ status pursuant to 15 CFR bribery and corruption, or that affect a 2003.6, will be available for public [FR Doc. 00–27903 Filed 10–30–00; 8:45 am] single sector). inspection shortly after the filing BILLING CODE 4910±13±M As in the case of last year’s NTE, we deadline. Inspection is by appointment are asking that particular emphasis be only with the staff of the USTR Public placed on any practices that may violate DEPARTMENT OF TRANSPORTATION Reading Room and can be arranged by U.S. trade agreements. We are also calling Brenda Webb (202) 395–6186. interested in receiving any new or Maritime Administration The Reading Room is open to the public updated information pertinent to the from 9:30 a.m. to 12 noon, and from 1 barriers covered in last year’s report as [Docket Number: MARAD±2000±8198] p.m. to 4 p.m., Monday through Friday. well as new information. Please note that the information not used in the Carmen Suro-Bredie, Requested Administrative Waiver of NTE will be maintained for use in future Chairman, Trade Policy Staff Committee. the Coastwise Trade Laws negotiations. [FR Doc. 00–27950 Filed 10–30–00; 8:45 am] AGENCY: Maritime Administration, It is MOST IMPORTANT that your BILLING CODE 3190±01±M Department of Transportation. submission contain estimates of the potential increase in exports that would ACTION: Invitation for public comments result from the removal of the barrier, as on a requested administrative waiver of DEPARTMENT OF TRANSPORTATION well as a clear discussion of the the Coastwise Trade Laws for the vessel MACCOBOY III. method(s) by which the estimates were Federal Aviation Administration computed. Estimates should fall within SUMMARY: As authorized by Public Law the following value ranges: less than $5 RTCA, Inc.; Government/Industry 105–383, the Secretary of million; $5 to $25 million; $25 million Certification Steering Committee Transportation, as represented by the to $50 million; $50 million to $100 Maritime Administration (MARAD), is million; $100 million to $500 million; or Pursuant to section 10(a)(2) of the authorized to grant waivers of the U.S.- over $500 million. Such assessments Federal Advisory Committee Act (P.L. build requirement of the coastwise laws enhance USTR’s ability to conduct 92–463, 5 U.S.C., Appendix 2), notice is under certain circumstances. A request meaningful comparative analyses of a hereby given for RTCA Government/ for such a waiver has been received by barrier’s effect over a range of Industry Certification Steering MARAD. The vessel, and a description industries. Committee meeting to be held Please note that interested parties November 14, 2000, from 10:00 a.m. to of the proposed service, is listed below. discussing barriers in more than one 2:00 p.m. The meeting will be held at Interested parties may comment on the country should provide a separate Federal Aviation Administration (FAA), effect this action may have on U.S. submission i.e., one that is self- 800 Independence Avenue, SW., vessel builders or businesses in the U.S. contained) for each country. Washington, DC 20591, in the Bessie that use U.S.-flag vessels. If MARAD Written Comments: All written Coleman Conference Center, Room 2AB. determines that in accordance with Pub. comments should be addressed to: The agenda will include: (1) Welcome L. 105–383 and MARAD’s regulations at Gloria Blue, Executive Secretary, Trade and Introductory Remarks; (2) Report 46 CFR Part 388 (65 FR 6905; February Policy Staff Committee, Office of the from Certification Select Committee: (a) 11, 2000) that the issuance of the waiver United States Trade Representative, 600 Select Committee Actions from Previous will have an unduly adverse effect on a 17th Street NW., Room 122, Meeting; (b) Report on Working Group- U.S.-vessel builder or a business that 1/SOIT Interface; (c) Report on FAA uses U.S.-flag vessels, a waiver will not Washington, DC 20508. ` All submissions must be in English Reauthorization ACT vis-a-vis Task be granted. and should conform to the information Force 4 Recommendations 11 and 14; DATES: Submit comments on or before requirements of 15 CFR 2003. A party (3) Review of Select Committee November 30, 2000.
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ADDRESSES: Comments should refer to registered length = 51.2ft, registered available at http://www.occ.treas.gov/ docket number MARAD–2000–8198. beam = 16.1ft, and registered depth = spln2000.pdf. Certain high level aspects Written comments may be submitted by 7.6ft.’’ of this strategic plan have been hand or by mail to the Docket Clerk, (3) Intended use for vessel, including summarized in the strategic plan of the U.S. DOT Dockets, Room PL–401, geographic region of intended operation Department of the Treasury which was Department of Transportation, 400 7th and trade. According to the applicant: ‘‘I sent to Congress on September 29, 2000, St., SW., Washington, DC 20590–0001. would like to be able to charter the in compliance with the Government You may also send comments vessel to carry six passengers and a Performance and Results Act. Copies of electronically via the Internet at http:// captain for coastwise cruises, also bare the OCC draft strategic plan have also dmses.dot.gov/submit/. All comments boat charters if charterers are qualified.’’ been submitted to committees of will become part of this docket and will ‘‘I would like the ability to cruise from Congress for consultation purposes. be available for inspection and copying California, Oregon to Alaska. Via This OCC draft strategic plan will help at the above address between 10 a.m. Canada.’’ guide the operations of OCC, and may and 5 p.m., E.T., Monday through (4) Date and Place of construction and be adjusted through interim adjustments Friday, except federal holidays. An (if applicable) rebuilding. Date of in annual performance plans sent to electronic version of this document and construction: 1967. Place of Congress. construction: Ditzum, Germany. all documents entered into this docket DATES: Comments must be received on (5) A statement on the impact this is available on the World Wide Web at or before November 30, 2000. http://dms.dot.gov. waiver will have on other commercial passenger vessel operators. According to ADDRESSES: Comments should be sent to FOR FURTHER INFORMATION CONTACT: Office of the Comptroller of the Gordon Angell, U.S. Department of the applicant: ‘‘The fact that the Maccoboy III is a old, slow, wooden Currency, 250 E Street, SW., Third floor, Transportation, Maritime Attention: Docket #00–23, Washington, Administration, MAR–832 Room 7201, boat with an abundance of character and sea keeping ability of north sea heritage DC 20219. You may submit comments 400 Seventh Street, SW., Washington, electronically to DC 20590. Telephone 202–366–5129. is very unique. In studying the applicable charter listings I don’t find [email protected]. SUPPLEMENTARY INFORMATION: Title V of any true comparable. Therefore I don’t FOR FURTHER INFORMATION CONTACT: Public Law 105–383 provides authority believe that the ‘‘Maccoboy III’’ will to the Secretary of Transportation to Sheila Zukor, Assistant Chief Financial have more than a negligible affect on the administratively waive the U.S.-build Officer, Planning and Budget, Office of present market, but might in fact requirements of the Jones Act, and other the Comptroller of the Currency, (202) establish a new market for this type statutes, for small commercial passenger 874–4518. vessel.’’ vessels (no more than 12 passengers). Dated: October 24, 2000. (6) A statement on the impact this This authority has been delegated to the Paul R. Gentille, waiver will have on U.S. shipyards. Maritime Administration per 49 CFR According to the applicant: ‘‘The vessel Deputy Chief Financial Officer. § 1.66, Delegations to the Maritime will continue to be maintained in U.S. [FR Doc. 00–27911 Filed 10–30–00; 8:45 am] Administrator, as amended. By this Shipyards.’’ BILLING CODE 4810±33±P notice, MARAD is publishing information on a vessel for which a Dated: October 26, 2000. request for a U.S.-build waiver has been By Order of the Maritime Administrator. DEPARTMENT OF THE TREASURY received, and for which MARAD Joel C. Richard, requests comments from interested Secretary, Maritime Administration. Customs Service parties. Comments should refer to the [FR Doc. 00–27929 Filed 10–30–00; 8:45 am] [T.D. 00±76] docket number of this notice and the BILLING CODE 4910±81±P vessel name in order for MARAD to Revocation of Customs Broker properly consider the comments. Licenses Comments should also state the DEPARTMENT OF THE TREASURY commenter’s interest in the waiver AGENCY: U.S. Customs Service, application, and address the waiver Office of the Comptroller of the Department of the Treasury. criteria given in § 388.4 of MARAD’S Currency ACTION: Customs Broker License regulations at 46 CFR Part 388. [Docket No. 00±23] Revocations. Vessel Proposed for Waiver of the U.S.- I, as Assistant Commissioner, Office Strategic Plan Build Requirement of Field Operations, pursuant to section (1) Name of vessel and owner for AGENCY: Office of the Comptroller of the 641 of the Tariff Act of 1930, as which waiver is requested. Name of Currency, Treasury. amended (19 U.S.C. 1641) and the vessel: Maccoboy III. Owner: Don A. ACTION: Notice and request for comment. Customs Regulations (19 CFR 111), Slater. hereby revoke by operation of law the (2) Size, capacity and tonnage of SUMMARY: The Office of the Comptroller following Customs broker licenses vessel. According to the applicant: of the Currency (OCC) hereby gives without prejudice based on the ‘‘gross tonnage = 51, net tonnage = 41, notice that a draft of its strategic plan is authority as annotated:
License Name Port No. Authority
Scott J. Goldberg ...... New York ...... 10686 19 CFR 111.30 (d)(4). Kenneth T. Brock ...... New York ...... 11266 19 CFR 111.30 (d)(4). Ronald Lee ...... New York ...... 07337 19 CFR 111.30 (d)(4). SAIMA Avandero USA, Inc ...... New York ...... 10718 19 CFR 111.45(a).
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Dated: October 25, 2000. DEPARTMENT OF THE TREASURY ACTION: Customs Broker License Bonni G. Tischler, Cancellations. Customs Service Assistant Commissioner, Office of Field I, as Assistant Commissioner, Office Operations. [T.D. 00±77] Field Operations, pursuant to Section [FR Doc. 00–27838 Filed 10–30–00; 8:45 am] 641 of the Tariff Act of 1930, as BILLING CODE 4820±02±P Cancellation of Customs Broker amended (19 U.S.C. 1641), and the Licenses Customs Regulations (19 CFR 111), hereby cancel the following Customs AGENCY: U.S. Customs Service, broker’s licenses without prejudice Department of the Treasury. based on the authority as annotated:
Name Port License No. Authority
United Motor Freight, Inc ...... Seattle ...... 14362 19 CFR 111.51(a). ClearFreight Corporation ...... San Francisco ...... 06174 19 CFR 111.51(a).
Dated: October 25, 2000. International Trade Center www.customs.gov/trade2000). Bonni G. Tischler, Amphitheater Auditorium, 1300 Registration, which will be accepted on Assistant Commissioner, Office of Field Pennsylvania Avenue, N.W., a space available basis, must be Operations. Washington, D.C. The symposium will confirmed by November 24, 2000. [FR Doc. 00–27837 Filed 10–30–00; 8:45 am] highlight Customs present programs and Dated: October 25, 2000. BILLING CODE 4820±02±P strategic plans, and its vision of Joseph M. Rees, international trade in the 21st century. Trade Ombudsman, U.S. Customs Service. The symposium will feature DEPARTMENT OF THE TREASURY Commissioner Raymond W. Kelly as the [FR Doc. 00–27836 Filed 10–30–00; 8:45 am] keynote speaker, presentations by senior BILLING CODE 4820±02±P Customs Service Customs officials, and a luncheon address by nationally-known political DEPARTMENT OF THE TREASURY Customs Trade Symposium 2000 analyst Mark Shields. A reception will AGENCY: Customs Service, Treasury. follow the program at which senior Fiscal Service ACTION: Notice of symposium. Customs officials will be available to answer questions. Treasury Current Value of Funds Rate SUMMARY: This document announces Symposium program topics include: AGENCY: Financial Management Service, that the Customs Service will convene Customs Strategic Vision— Fiscal Service, Treasury. a major trade symposium to discuss the Preparation for a new era of global trade agency’s programs, strategic plans, and and the challenges that must be ACTION: Notice of rate for use in Federal its vision for trade in the 21st century. addressed; debt collection and discount evaluation. The Automated Commercial Members of the international trade and SUMMARY: Pursuant to Section 11 of the transportation community are invited, Environment (ACE)—Timetable for Debt Collection Act of 1982 (31 U.S.C. and, if interested, are requested to implementation; 3717), the Secretary of the Treasury is Trade Compliance—New policies to register early. responsible for computing and drive compliance improvements and to DATES: The symposium will be held on publishing the percentage rate to be deliver benefits to low-risk importers; Thursday, November 30, 2000, from used in assessing interest charges for The Entry Revision Project (ERP)— 8:00 a.m. to 6:00 p.m. All registrations outstanding debts on claims owed the The future of Customs entry processing; must be made on-line and confirmed by Government. Treasury’s Cash The Reconcilliation Prototype November 24, 2000. Management Regulations (I TFM 6– (RECON II)—Streamlining the process ADDRESSES: 8000) also prescribe use of this rate by The meeting will be held in and providing a path to periodic filing agencies as a comparison point in Washington, D.C. at the Ronald Reagan of post entry amendments; Building and International Trade Post Entry Amendments— evaluating the cost-effectiveness of a Center, Amphitheater Auditorium, at Implementation of new policies cash discount. Notice is hereby given 1300 Pennsylvania Avenue, N.W. designed to simplify the Supplemental that the applicable rate is 6 percent for FOR FURTHER INFORMATION CONTACT: ACS Information Letter and improve calendar year 2001. Client Representatives; Customs compliance; and DATES: The rate will be in effect for the Account Managers; or the Office of the Drawback—Proposals for major period beginning on January 1, 2001 and Trade Ombudsman at (202) 927–1440 legislative changes to modernize the ending on December 31, 2001. ([email protected]). drawback process. FOR FURTHER INFORMATION CONTACT: To obtain the latest information on Members of the international trade Inquiries should be directed to the program changes or to register on-line, and transportation community are Program Compliance Division, Financial visit the Customs website at http:// invited to attend the Symposium. The Management Service, Department of the www.customs.gov/trade2000. cost is $ 150 per individual. This Treasury, 401 14th Street, SW., SUPPLEMENTARY INFORMATION: Customs includes the cost of the symposium, Washington, DC 20227 (Telephone: will be convening a major trade continental breakfast, luncheon, and a (202) 874–6630). symposium (Customs Trade Symposium post-symposium reception. Interested SUPPLEMENTARY INFORMATION: The rate 2000) on Thursday, November 30, 2000, parties are requested to register early. reflects the current value of funds to the from 8:00 a.m. to 6:00 p.m. at the All registrations must be made on-line Treasury for use in connection with Ronald Reagan Building and at the Customs website (http:// Federal Cash Management systems and
VerDate 112000 19:49 Oct 30, 2000 Jkt 194001 PO 00000 Frm 00115 Fmt 4703 Sfmt 4703 E:\FR\FM\31OCN1.SGM pfrm02 PsN: 31OCN1 Federal Register / Vol. 65, No. 211 / Tuesday, October 31, 2000 / Notices 65041 is based on investment rates set for Abstract: These post card forms are to DEPARTMENT OF THE TREASURY purposes of Pub. L. 95–147, 91 Stat. be used by the community based outlet 1227. Computed each year by averaging participants (i.e. grocery stores, credit Internal Revenue Service investment rates for the 12-month unions, copy centers, and corporations) period ending every September 30 for to order tax products. The post card will Information Reporting Program applicability effective January 1, the rate be returned to the Western Area Advisory Committee; Meeting is subject to quarterly revisions if the Distribution Center for processing and AGENCY: Internal Revenue Service (IRS), annual average, on the moving basis, order fulfillment. Treasury. changes by 2 per centum. The rate in Current Actions: There are no changes ACTION: Notice of Open Meeting of the effect for calendar year 2001 reflects the being made to these forms at this time. Information Reporting Program average investment rates for the 12- Advisory Committee. month period that ended September 30, Type of Review: Extension of a 2000. currently approved collection. SUMMARY: In 1991 the IRS established Affected Public: Business or other for- Dated: October 25, 2000. the Information Reporting Program profit organizations. Advisory Committee (IRPAC) in Bettsy H. Lane, response to a recommendation made by Assistant Commissioner, Federal Finance. Estimated Number of Respondents: 18,000. the United States Congress. The primary [FR Doc. 00–27895 Filed 10–30–00; 8:45 am] purpose of IRPAC is to provide an BILLING CODE 4810±35±M Estimated Time Per Respondent: 5 organized public forum for discussion of minutes. relevant information reporting issues Estimated Total Annual Burden between the officials of the IRS and DEPARTMENT OF THE TREASURY Hours: 1,501. representatives of the payer/practitioner community. IRPAC offers constructive Internal Revenue Service The following paragraph applies to all of the collections of information covered observations about current or proposed Proposed Collection; Comment by this notice: policies, programs, and procedures and, when necessary, suggests ways to Request for Forms 12813, 12814, 12815 An agency may not conduct or and 12816 improve the operation of the sponsor, and a person is not required to Information Reporting Program (IRP). AGENCY: Internal Revenue Service (IRS), respond to, a collection of information There will be a meeting of IRPAC on Treasury. unless the collection of information Thursday, November 16, 2000. The displays a valid OMB control number. ACTION: meeting will be held in Room 3313 of Notice and request for Books or records relating to a collection comments. the Internal Revenue Service Main of information must be retained as long Building, which is located at 1111 SUMMARY: The Department of the as their contents may become material Constitution Avenue, NW., Washington, Treasury, as part of its continuing effort in the administration of any internal DC. A summarized version of the to reduce paperwork and respondent revenue law. Generally, tax returns and agenda along with a list of topics that burden, invites the general public and tax return information are confidential, are planned to be discussed are listed other Federal agencies to take this as required by 26 U.S.C. 6103. below. opportunity to comment on proposed Request for Comments Summarized Agenda For Meeting and/or continuing information collections, as required by the Comments submitted in response to 9:00—Meeting Opens Paperwork Reduction Act of 1995, this notice will be summarized and/or 11:30—Break for Lunch Public Law 104–13 (44 U.S.C. included in the request for OMB 1:00—Meeting Resumes 3506(c)(2)(A)). Currently, the IRS is approval. All comments will become a 4:00—Meeting Adjourns soliciting comments concerning Forms matter of public record. Comments are The topics that are planned to be 12813, 12814, 12815, and 12816, Return invited on: (a) Whether the collection of covered are as follows: Post Card for the Community Based information is necessary for the proper (1) Electronic Payee Statements (2) Proposed Regulations under Sections Outlet Participants. performance of the functions of the 6041 & 6045 (‘‘Middleman’’ DATES: Written comments should be agency, including whether the information shall have practical utility; Regulation) received on or before January 2, 2001 to (3) Hope and Lifetime Learning Credit (b) the accuracy of the agency’s estimate be assured of consideration. Proposed Regulation of the burden of the collection of ADDRESSES: Direct all written comments (4) Section 1441 Regulation and Related to Garrick R. Shear, Internal Revenue information; (c) ways to enhance the Forms & Instructions Service, room 5244, 1111 Constitution quality, utility, and clarity of the (5) Employment Tax Administration Avenue NW., Washington, DC 20224. information to be collected; (d) ways to and Compliance minimize the burden of the collection of FOR FURTHER INFORMATION CONTACT: (6) IRPAC’s Articles in the ‘‘IRS/SSA information on respondents, including Requests for additional information or Reporter’’ through the use of automated collection (7) File Information Returns copies of the forms and instructions techniques or other forms of information Electronically (FIRE) System should be directed to Carol Savage, technology; and (e) estimates of capital (8) Expansion of the Combined Federal/ (202) 622–3945, Internal Revenue or start-up costs and costs of operation, State Information Return Filing Service, room 5242, 1111 Constitution maintenance, and purchase of services Program Avenue NW., Washington, DC 20224. to provide information. (9) Medical Service Provider and Sole SUPPLEMENTARY INFORMATION: Approved: October 24, 2000. Proprietor Alerts Title: Return Post Card for the (10) Proposed IRP Web-Site Community Based Outlet Participants. Garrick R. Shear, (11) Section 457 (b) Plans OMB Number: 1545–1703. IRS Reports Clearance Officer. (12) Usage of Multiple Codes for Form Numbers: 12813, 12814, 12815, [FR Doc. 00–27961 Filed 10–30–00; 8:45 am] Reporting Roth and Education IRA and 12816. BILLING CODE 4830±01±P Distributions
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(13) Reporting Excess Contributions November 13, 2000. Ms. Johnson can be DEPARTMENT OF VETERANS under 403 (b) Plans reached by e-mail at AFFAIRS (14) Information Reporting Forms and [email protected], or by Publications telephone at 202–622–6440. Notification National Research Advisory Council; (15) Underreporter and the Substitute- of intent to attend should include your Notice of Meeting for-Return Programs name, organization and phone number. Note: Last minute changes to these topics If you leave this information for Ms. The Department of Veterans Affairs are possible and could prevent advance Johnson in a voice-mail message, please (VA) gives notice under Public Law 92– notice. spell out all names. A draft of the 463 (Federal Advisory Committee Act) SUPPLEMENTARY INFORMATION: IRPAC agenda will be available via e-mail or that the Veterans Affairs National currently reports to the Director, facsimile transmission the week prior to Research Advisory Council will meet at National Public Liaison, who is the the meeting. Please call or e-mail Ms. the Ronald Reagan Building and executive responsible for administering Romona Johnson on or after Wednesday, International Trade Center, Continental this formally chartered federal advisory November 8, 2000, to have a copy of the Room, 1300 Pennsylvania Avenue, NW., committee. IRPAC is instrumental in agenda faxed or e-mailed to you. Please Washington, DC 20004, on November providing advice to enhance the IRP note that a draft agenda will not be 13, 2000, from 10 to 11:30 a.m. and 1:30 Program. Increasing participation by available until that date. to 3 p.m. The agenda for the first session external stakeholders in the planning ADDRESSES: If you would like to have of the inaugural meeting will include and improvement of the tax system will IRPAC consider a written statement at a the history and overview of the policies help achieve the goals of increasing future IRPAC meeting (not this of VA research, followed by a voluntary compliance, reducing burden, upcoming meeting), please write to Ms. background session on the challenges and improving customer service. Kate LaBuda at the IRS, National Public IRPAC is currently comprised of Liaison, CL:NPL:PAC, Room 7559, 1111 for the direction of the research and representatives from various segments Constitution Avenue, NW., Washington, development program as related to of the information reporting payer/ DC, 20224, or e-mail her at policy, research centers, staffing, and practitioner community. IRPAC [email protected]. operations. Established by the Secretary members are not paid for their time or FOR FURTHER INFORMATION CONTACT: To of Veterans Affairs, the purpose of the services, but consistent with Federal get on the access list to attend this Council is to provide external advice regulations, they are reimbursed for meeting, or to have a copy of the agenda and review for VA’s research mission. their travel and lodging expenses to faxed to you on or after November 8, Those planning to attend the open attend two public meetings each year. 2000, please e-mail Ms. Romona meeting should contact Ms. Sandra DATES: The meeting will be open to the Johnson at [email protected], or Young, Office of Research and public, and will be in a room that call her at 202–622–6440. For general Development at (202) 273–8284. accommodates approximately 80 information about IRPAC, please e-mail people, including members of IRPAC Dated: October 24, 2000. Ms. Kate LaBuda at [email protected] Marvin R. Eason, and IRS officials. Seats are available to or call her at 202–622–8028. members of the public on a first-come, Committee Management Officer. first-served basis. In order to get your Susanne M. Sottile, [FR Doc. 00–27960 Filed 10–30–00; 8:45 am] name on the building access list, Director, National Public Liaison, Office of BILLING CODE 8320±01±M notification of intent to attend this Communication and Liaison. meeting must be made with Ms. Romona [FR Doc. 00–27962 Filed 10–30–00; 8:45 am] Johnson no later than Monday, BILLING CODE 4830±01±P
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Part II
Department of Housing and Urban Development 24 CFR Part 81 HUD’s Regulation of the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac); Final Rule
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DEPARTMENT OF HOUSING AND level of activity in specific mortgage ‘‘HUD’’) authority to regulate the GSEs. URBAN DEVELOPMENT markets that provide financing for The authority exercised by the housing serving low- and moderate- Department is established under: 24 CFR Part 81 income families, including small (1) The Federal National Mortgage [Docket No. FR±4494±F±02] multifamily rental properties, single Association Charter Act (‘‘Fannie Mae family owner-occupied rental Charter Act’’), which is Title III of the RIN 2501±AC60 properties, manufactured housing, and National Housing Act, section 301 et markets for seasoned mortgages on seq. (12 U.S.C. 1716 et seq.); HUD's Regulation of the Federal properties with affordable housing. As (2) The Federal Home Loan Mortgage National Mortgage Association (Fannie the GSEs continue to grow their Corporation Act (‘‘Freddie Mac Act’’), Mae) and the Federal Home Loan businesses, the new goals will provide which is Title III of the Emergency Mortgage Corporation (Freddie Mac) strong incentives for the two enterprises Home Finance Act of 1970, section 301 AGENCY: Office of the Assistant to more fully address the housing et seq. (12 U.S.C. 1451 et seq.); and Secretary for Housing ‘‘ Federal Housing finance needs for very low-, low- and (3) FHEFSSA, enacted as Title XIII of Commissioner, HUD. moderate-income families and residents the Housing and Community of underserved areas and, thus, more Development Act of 1992 (Pub. L. 102– ACTION: Final rule. fully realize their public purposes. 550, approved October 28, 1992) (12 SUMMARY: This final rule establishes In addition, as government sponsored U.S.C. 4501–4641). new housing goal levels for the Federal enterprises and market leaders, Fannie (4) Section 7(d) of the Department of National Mortgage Association (Fannie Mae and Freddie Mac have a public Housing and Urban Development Act Mae) and the Federal Home Loan responsibility to help eliminate (42 U.S.C. 3535(d)), which provides that Mortgage Corporation (Freddie Mac) predatory mortgage lending practices the Secretary may make such rules and (collectively, the ‘‘Government which are inimical to the home regulations as may be necessary to carry Sponsored Enterprises,’’ or the ‘‘GSEs’’) financing and homeownership out his functions, powers, and duties, for the years 2001 through 2003. The objectives that the GSEs were and may delegate and authorize new housing goal levels are established established to serve. Fannie Mae and successive redelegations of such in accordance with the Federal Housing Freddie Mac have adopted policies functions, powers, and duties to officers Enterprises Financial Safety and stating that they will not purchase and employees of the Department. Soundness Act of 1992 (FHEFSSA), and mortgage loans with certain predatory FHEFSSA substantially changed the govern the purchase by Fannie Mae and characteristics. This final rule affirms Department’s regulatory authorities Freddie Mac of mortgages financing the GSEs’ actions by disallowing governing the GSEs by establishing a low- and moderate-income housing, housing goals credit for mortgages separate safety and soundness regulator special affordable housing, and housing having features that the GSEs within the Department and clarified and in central cities, rural areas and other themselves have identified as expanded the Department’s regulation underserved areas. Specifically, the unacceptable. of the GSEs’ missions. Regulations first implementing the Department’s final rule increases the Low- and EFFECTIVE DATE: January 1, 2001. authorities with respect to the GSEs’ Moderate-Income Housing Goal to 50 FOR FURTHER INFORMATION CONTACT: percent, the Geographically Targeted missions under FHEFSSA were issued Director, Office of Government on December 1, 1995 (24 CFR part 81). Goal to 31 percent, and the Special Sponsored Enterprises Oversight, Office Affordable Housing Goal to 20 percent This rule revises certain portions of of Housing, Room 6182, telephone 202– those regulations concerning the GSEs’ of units backing each GSE’s annual 708–2224. For questions on data or eligible mortgage transactions. The affordable housing goals and provisions methodology, contact John L. Gardner, related to how mortgage loans are Special Affordable Multifamily Subgoal Director, Financial Institutions increases to one percent of each GSE’s treated in the calculation of Regulation Division, Office of Policy performance under the housing goals. average annual total dollar mortgage Development and Research, Room 8234, purchases in 1997 through 1999. This The remaining part of the preamble telephone (202) 708–1464. For legal contains several endnotes. These rule also establishes new provisions and questions, contact Kenneth A. Markison, clarifies certain other provisions of endnotes appear at the end of the Assistant General Counsel for preamble. HUD’s rules for counting different types Government Sponsored Enterprises/ of mortgage purchases towards the RESPA, Office of the General Counsel, B. Background goals, including provisions regarding Room 9262, telephone 202–708–3137. 1. Fannie Mae and Freddie Mac the use of bonus points for mortgages The address for all of these persons is that are secured by certain single family Department of Housing and Urban Fannie Mae and Freddie Mac engage rental properties and small multifamily Development, 451 Seventh Street, SW., in two principal businesses: investing in properties; and the disallowance of Washington, DC 20410. Persons with residential mortgages and guaranteeing goals credit for mortgage loans with hearing and speech impairments may securities backed by residential predatory characteristics. access the phone numbers via TTY by mortgages. Fannie Mae and Freddie Mac While Fannie Mae and Freddie Mac calling the Federal Information Relay are chartered by Congress as have been successful in providing Service at (800) 877–8399. Government Sponsored Enterprises to: stability and liquidity in the market for (1) Provide stability in the secondary certain types of mortgages, their share of SUPPLEMENTARY INFORMATION market for residential mortgages; (2) the affordable housing market is I. General respond appropriately to the private substantially smaller than their share of capital market; (3) provide ongoing the total conventional, conforming A. Purpose assistance to the secondary market for mortgage market. There are several This final rule revises existing residential mortgages (including reasons for these disparities, related to regulations implementing the activities relating to mortgages on the GSEs’ purchase and underwriting Department of Housing and Urban housing for low- and moderate-income guidelines; and to their relatively low Development’s (the ‘‘Department’’ or families involving a reasonable
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According and older housing in need of increasing the liquidity of mortgage to the Department of the Treasury, rehabilitation. investments and improving the Fannie Mae and Freddie Mac appear to While HUD recognizes that the GSEs distribution of investment capital pass through part of these benefits to have played a significant role in the available for residential mortgage consumers through reduced mortgage mortgage finance industry by providing financing; and (4) promote access to costs and retain part for their own a secondary market and liquidity for mortgage credit throughout the nation stockholders.5 mortgage financing for certain segments (including central cities, rural areas, and The GSEs have achieved an important of the mortgage market, it is this other underserved areas) by increasing part of their mission: providing stability recognition of their ability, along with the liquidity of mortgage investments and liquidity to large segments of the HUD’s comprehensive analyses of the and improving the distribution of housing finance markets. As a result of size of the mortgage market and the investment capital available for the GSEs’ activities, many home buyers opportunities available, America’s residential mortgage financing.1 have benefited from lower interest rates unmet housing needs, identified credit Fannie Mae and Freddie Mac receive and increased access to capital, gaps, and HUD’s consideration of the significant explicit benefits through contributing, in part, to a record statutory factors under FHEFSSA that their status as GSEs that are not enjoyed national homeownership rate of 66.8 causes HUD to increase the level of the by any other shareholder-owned percent in 1999. While the GSEs have housing goals so that as the GSEs grow corporations in the mortgage market. been successful in providing stability their businesses so they will address These benefits include: (1) Conditional and liquidity to certain portions of the new markets and persistent housing access to a $2.25 billion line of credit mortgage market, the GSEs must further finance needs. from the U.S. Treasury; 2 (2) exemption utilize their entrepreneurial talents and 2. Regulation of the GSEs from the securities registration power in the marketplace and ‘‘lead the requirements of the Securities and mortgage finance industry’’ to ‘‘ensure In 1968, Congress assigned HUD Exchange Commission and the States; 3 that citizens throughout the country general regulatory authority over Fannie and (3) exemption from all State and enjoy access to the public benefits Mae,8 and in 1989, Congress granted the local taxes except property taxes.4 provided by these federally related Department essentially identical Additionally, although the securities entities.’’ 6 regulatory authority over Freddie Mac.9 the GSEs guarantee and the debt Despite the record national Under the 1968 law, HUD was instruments they issue are not backed homeownership rate in 1999, lower authorized to require that a portion of by the full faith and credit of the United homeownership rates have prevailed for Fannie Mae’s mortgage purchases be States, and nothing in this final rule certain minorities, especially for related to the national goal of providing should be construed otherwise, such African-American households (46.3 adequate housing for low- and securities and instruments trade at percent) and Hispanics (45.5 percent). moderate-income families. Accordingly, yields only a few basis points over those These gaps are only partly explained by the Department established two housing of U.S. Treasury securities and at yields differences in income, age, and other goals—a goal for mortgages on low- and lower than those for securities issued by socioeconomic factors. Disparities in moderate-income housing and a goal for comparable firms that are fully private mortgage lending are a contributing mortgages on housing located in central but may be higher capitalized. The factor to lower homeownership rates cities—by regulation, for Fannie Mae in market prices for GSE debt and and are reflected in loan denial rates of 1978.10 Each goal was established at the mortgage-backed securities, and the fact minority groups when compared to level of 30 percent of mortgage that the market does not require that white applicants. Denial rates for purchases. Similar housing goals for those securities be rated by a national conventional (non-government-backed) Freddie Mac were proposed by the rating agency, suggest that investors home purchase mortgage loans in 1998 Department in 1991 but were not perceive that the government implicitly were 54 percent for African Americans, finalized before October 1992, when backs the GSEs’ debt and securities. 53 percent for Native American Congress revised the Department’s GSE This perception evidently arises from applicants, 39 percent for Hispanic regulatory authorities including the GSEs’ relationship to the Federal applicants, 26 percent for White requirements for new housing goals. Government, including their public applicants, and 12 percent for Asian In 1992, Congress enacted the Federal purposes, their Congressional charters, applicants.7 Despite strong economic Housing Enterprises Financial Safety their potential direct access to U.S. growth, low unemployment, low and Soundness Act (FHEFSSA) as Title Department of Treasury funds, and the mortgage interest rates, and relatively XIII of the Housing and Community statutory exemptions of their debt and stable home prices, housing problems Development Act of 1992 (Pub. L. 102– mortgage-backed securities (MBS) from continue to persist for low-income 550, approved October 28, 1992) (12 otherwise mandatory security laws. families and certain minorities. U.S.C. 4501–4641), which established Consequently, each GSE enjoys a In addition to disparities across racial the Office of Federal Housing Enterprise significant implicit benefit—its cost of groups, populations who live in certain Oversight (OFHEO) as the GSEs’ safety doing business is significantly less than types of housing have not benefited to and soundness regulator and affirmed, that of other firms in the mortgage the same degree as have others from the clarified and expanded the Secretary of market. According to a U.S. Department advantages and efficiencies provided by Housing and Urban Development’s of Treasury 1996 study, the benefits of Fannie Mae and Freddie Mac. The GSEs responsibilities for GSE mission federal sponsorship are worth almost $6 have been much less active in regulation. FHEFSSA provided that, billion annually to Fannie Mae and purchasing mortgages in markets where except for the specific authority of the Freddie Mac. Of this amount, reduced there is a need for additional financing Director of OFHEO, the Secretary operating costs (i.e., exemption from to address persistent housing needs retained general regulatory power over SEC filing fees and from state and local including financing for small the GSEs.11 FHEFSSA also detailed and income taxes) represent approximately multifamily rental properties, expanded the Department’s specific $500 million annually. These estimates manufactured housing, single family are broadly consistent with estimates by owner-occupied rental properties, 11 11. Sec. 1321.
VerDate 112000 18:02 Oct 30, 2000 Jkt 194001 PO 00000 Frm 00003 Fmt 4701 Sfmt 4700 E:\FR\FM\31OCR2.SGM pfrm08 PsN: 31OCR2 65046 Federal Register / Vol. 65, No. 211 / Tuesday, October 31, 2000 / Rules and Regulations powers and authorities, including the The rule also proposed to clarify HUD’s loans, purchases of federally insured power to establish, monitor, and enforce guidelines for counting different types mortgage loans and purchases of housing goals for the GSEs’ purchases of of mortgage purchases under the mortgage loans on properties with mortgages that finance housing for low- housing goals, including treatment of expiring assistance contracts; (6) and moderate-income families; housing missing affordability data and purchases provides for HUD’s review of located in central cities, rural areas, and of seasoned mortgage loans; use of transactions to determine appropriate other underserved areas; and special bonus points for goals credit for goal treatment; and (7) includes certain affordable housing, affordable to very purchases of mortgages secured by definitional and technical corrections to low-income families and low-income single family rental and small the regulations issued in 1995. families in low-income areas.12 The multifamily properties; and providing Specific changes included in the Final Department is required to establish each greater public access to certain types of Rule from the provisions included in of the goals after consideration of mortgage data on the GSEs’ mortgage the Proposed Rule are as follows: certain prescribed factors relevant to the purchases in HUD’s public use database. (1) The period covered by the housing particular goal.13 The rule also solicited public comments goals is 2001 through 2003 and there is FHEFSSA provided for a transition on several other issues related to the no transition year. The proposed rule period during 1993 and 1994 and housing goals including the appropriate had suggested the goals cover the period required HUD to establish interim goals role of credit enhancements in from 2000 through 2003 with 2000 for the transition period (58 FR 53048; furthering affordable housing lending serving as a transition year. October 13, 1993) (59 FR 61504; and whether the use of credit (2) The Special Affordable November 30, 1994). In November 1994, enhancements should be considered in Multifamily Subgoal uses the average of HUD extended the interim goals calculating housing goal performance. 1997 through 1999 as the base period for established for 1994 for both GSEs establishing the level of the goal over through 1995 while the Department D. This Final Rule the 2001 through 2003 period, rather completed its development of post In response to the proposed rule, HUD than 1998 as the base period, as transition goals. received over 250 comments. The proposed. The subgoal remains a fixed The Department issued proposed and comments came from the GSEs; dollar amount for each year of the final rules in 1995 establishing and individuals; representatives of lending period covered by the housing goals implementing the housing goals for the institutions; non-profit organizations; base equal to one percent of each GSE’s years 1996 through 1999. The rule community, consumer groups and civil average total mortgage purchases in provided that the housing goals for 1999 rights organizations; local and State 1997 through 1999. would continue beyond 1999 if the governments; and others. Following full (3) The final rule does not allow goals Department did not change the goals, consideration of the comments, HUD credit for predatory mortgage loans, and and further provided that HUD may developed this final rule. The final rule the rule describes specific change the level of the goals for the is consistent with the approach characteristics, in addition to the years 2000 and beyond based upon announced in the proposed rule but HOEPA definition suggested in the HUD’s experience and in accordance does include some revisions adopted in proposed rule, to determine what types with HUD’s statutory authority and light of the comments received. The of loans are considered predatory. The responsibility. final rule: (1) Increases the level of the final rule also identifies good lending In addition to establishing the level of housing goals for the years 2001 through practices with which mortgages should the housing goals, the 1995 final rule 2003 as a result of HUD’s review of the conform in order to count towards goals included counting requirements for statutory factors under FHEFSSA to credit. purposes of calculating performance ensure that the GSEs continue and (4) The proposed provisions for the under the housing goals. The new strengthen their efforts to carry out treatment of missing affordability data regulations also prohibited the GSEs Congress’ intent that the GSEs provide are retained but the final rule includes from discriminating in any manner on the benefits of the secondary market to a five percent ceiling on the use of any prohibited basis in their mortgage families throughout the nation—the estimated affordability information for purchases, implemented procedures by Low- and Moderate-Income Housing multifamily units. which HUD exercises its authority to Goal increases to 50 percent, the (5) The guidance provided on how to review new programs of the GSEs, Geographically Targeted Goal increases determine if seasoned mortgage loan required reports from the GSEs, to 31 percent, the Special Affordable purchases meet the recycling established a public use data base on the Housing Goal increases to 20 percent; requirements of the Special Affordable GSEs’ mortgage purchase activities and the Special Affordable Multifamily Housing Goal was expanded to (1) while providing protections for Subgoal increases to the respective include additional types of lending confidential and proprietary average of one percent of each GSE’s organizations with affordable housing information, and established total mortgage purchases over 1997 missions that are presumed to meet the enforcement procedures under through 1999; (2) establishes the use of recycling requirements; (2) adjust the FHEFSSA. bonus points for small multifamily Community Reinvestment Act (CRA) properties with 5 to 50 units and for examination requirement for Federally C. The Proposed Rule single family owner-occupied rental regulated financial institutions to one On March 9, 2000,14 HUD published properties for the years 2001 through ‘‘Satisfactory’’ rating for financial a rule proposing new housing goal 2003; (3) establishes a temporary institutions with assets of $250 million levels for Fannie Mae and Freddie Mac. adjustment factor for Freddie Mac’s or less to accommodate a less frequent The rule proposed to increase the level multifamily mortgage purchases for the examination schedule; and (3) specify of the housing goals for the purchase by years 2001 through 2003; (4) prohibits requirements that a seller must meet for Fannie Mae and Freddie Mac of the counting of high cost mortgage loans purposes of evaluating whether the mortgages financing low- and moderate- with predatory features for goals credit; seller meets the recycling requirements income housing, special affordable (5) provides or clarifies counting rules of 12 U.S.C. 4563(b)(1)(B). housing, and housing in central cities, for the treatment of missing affordability (6) The final rule does not make rural areas, and other underserved areas. data, purchases of seasoned mortgage changes to the definition of underserved
VerDate 112000 18:02 Oct 30, 2000 Jkt 194001 PO 00000 Frm 00004 Fmt 4701 Sfmt 4700 E:\FR\FM\31OCR2.SGM pfrm08 PsN: 31OCR2 Federal Register / Vol. 65, No. 211 / Tuesday, October 31, 2000 / Rules and Regulations 65047 area other than the inclusion of tribal in underserved markets and address transactions, and the availability of data lands in underserved areas and does not unmet credit needs. The addition of on the public use data base. It should be address the public availability of bonus points to the regulatory structure noted that in evaluating these comments mortgage data in the public use data provides an additional means of a large number of comments were base. As explained below, HUD will encouraging the GSEs’ affordable received that included substantially publish a decision on which data housing activities to address identified, similar responses, in both language and elements will be accorded proprietary persistent credit needs while leaving the tone, to those submitted by Fannie Mae. and non-proprietary treatment by specific approaches to meeting these In addressing the appropriate goals separate Order following publication of needs to the GSEs. treatment for high cost mortgages, one this final rule. (3) Discrimination in lending—albeit group of commenters, comprised The analysis of Fannie Mae’s and sometimes subtle and unintentional— primarily of non-profit and housing Freddie Mac’s affordable housing has denied racial and ethnic minorities advocacy groups, felt the provisions performance, which is the basis for the same access to credit to purchase a included in the proposed rule many of the changes in the final rule, is home that has been available to disallowing credit for loans that meet primarily based on data from 1997, 1998 similarly situated non-minorities. The the HOEPA definition should be and 1999. The GSEs’ actual performance GSEs have a central role and strengthened. Other commenters, is presented through 1999. However, responsibility to promote access to consistent with the comments provided Home Mortgage Disclosure Act (HMDA) capital for minorities and other by Fannie Mae, opposed any limitation data which provides data on the identified groups and to demonstrate of goals credit for predatory mortgage conventional, conforming market was the benefits of such lending to industry loans. not available for 1999 at the time HUD and borrowers alike. The GSEs also have With regard to credit enhancements, a prepared its analysis supporting this an integral role in eliminating mortgage substantial majority of commenters final rule. As HMDA data for 1999 were lending practices that are predatory. noted that credit enhancements are a (4) In addition to the GSEs’ purchases not available, comparisons between the critical component of many affordable of single family home loans, the GSEs GSEs and the market as a whole for that housing transactions. There was little also must continue to assist in the year are not possible. Further, as 1998 support for limiting goals credit for creation of an active secondary market was a year with a large percentage of affordable housing transactions that for multifamily loans. Affordable rental refinance mortgage transactions, at include credit enhancements without a housing is essential for those families times 1997 data is utilized as it presents better understanding of how to ensure a more normal year in terms of home who cannot afford or choose not to that there are not negative implications purchase mortgage transactions. become homeowners. The GSEs must for affordable housing transactions. In finalizing these regulations, the assist in making capital available to The Department received comments Department is guided by and affirms the assure the continued development of supporting both increased data following principles established in the rental housing. 1995 rulemaking: availability and limited availability of (1) To fulfill the intent of FHEFSSA, II. Discussion of Public Comments data. One group of commenters, the GSEs should lead the industry in A. Overview including non-profit organizations and ensuring that access to mortgage credit academic researchers, felt the provisions is made available for very low-, low- 1. Public Comment included in the proposed rule should be and moderate-income families and Of the over 250 comments received, adopted and, in some instances, residents of underserved areas. HUD by far the most detailed were the expanded in order to fully understand recognizes that, to lead the mortgage submissions of the two directly affected and challenge the GSEs on their industry over time, the GSEs will have GSEs—Fannie Mae and Freddie Mac. affordable housing activities. Again, to stretch to reach certain goals and Each GSE’s comments were in large another group of commenters, close the gap between the secondary measure supportive of the overall goal consistent with the comments provided mortgage market and the primary structure proposed by the Department. by Fannie Mae, opposed the availability mortgage market. This approach is The GSEs, however, did provide of additional data on the public use data consistent with Congress’ recognition extensive appendices questioning the base. This group of commenters that ‘‘the enterprises will need to stretch Department’s methodology in included both lenders and non-profit their efforts to achieve’’ the goals.15 determining market share for the three organizations which felt the additional (2) The Department’s role as a affordable housing goals, a key data would release confidential business regulator is to set broad performance component for establishing the information and could compromise the standards for the GSEs through the appropriate level of the housing goals. privacy of individuals, respectively. housing goals, but not to dictate the Other commenters included national This final rule does not, however, specific products or delivery and regional industry related groups, address the availability of data on the mechanisms the GSEs will use to non-profit organizations, state and local public use data base. achieve a goal. Regulating two government officials, lenders, and A discussion of the general and exceedingly large financial enterprises individuals. In large measure, these specific comments on the rule follows in a dynamic market requires that HUD commenters were also supportive of the in subsequent sections. While provide the GSEs with sufficient Department’s proposal to increase the comments are summarized, not all of latitude to use their innovative affordable housing goals and the related the comments are addressed explicitly capacities to determine how best to provisions designed to streamline the in this preamble. HUD fully considered develop products to carry out their counting rules used to calculate all of the comments and HUD’s response respective missions. HUD’s regulations performance under the housing goals. is either explicit in this final rule or should allow the GSEs to maintain their Other than the goals framework, the implicit in the general discussion of the flexibility and their ability to respond areas generating the largest response rule or other comments. HUD is quickly to market opportunities. At the from commenters were the treatment of appreciative of the full range of public same time, the Department must ensure high cost mortgages, the role of credit comments received and acknowledges that the GSEs’ strategies serve families enhancements in affordable lending the value of all of the comments
VerDate 112000 18:02 Oct 30, 2000 Jkt 194001 PO 00000 Frm 00005 Fmt 4701 Sfmt 4700 E:\FR\FM\31OCR2.SGM pfrm08 PsN: 31OCR2 65048 Federal Register / Vol. 65, No. 211 / Tuesday, October 31, 2000 / Rules and Regulations submitted in response to the proposed subject matters included in the Budget of the Executive Office of the rule. proposed rule. Subject matter meetings President. This definition raised were held on the availability of data on questions as to the definition of 2. Other Public Input the public use data base, issues related ‘‘underserved area’’ and the As part of the public comment to identifying and meeting the credit denominator of the affordability ratio process, the Department conducted needs of non-metropolitan areas, and used to compute the Low- and extensive outreach to educate and the role of credit enhancements in Moderate-Income Housing Goal and the inform interested parties of the nature affordable housing lending. Special Affordable Housing Goal and extent of the GSEs’ affordable c. Other Meetings. In addition to the regarding whether to use the median housing activities. The outreach was meetings described above, the income of the CMSA or the PMSA. HUD undertaken in order to encourage Department met with various industry has consistently relied upon median comments on the proposed rule from a trade groups and non-profit incomes of PMSAs in defining wide range of individuals, organizations organizations to present the changes underserved areas and determining and businesses that are interested in or suggested in the proposed rule and the denominators for the other goals and are affected by Congress’ charge to the rationale for the changes. HUD also met this final rule clarifies this point. GSEs to further the financing needs of with Fannie Mae and Freddie Mac to 3. Underserved Area underserved families and discuss their concerns regarding the neighborhoods. The Department’s proposed rule. a. Technical Definition. HUD outreach in this regard included two proposed to revise the definition of forums, three subject matter meetings, B. Subpart A—General ‘‘underserved area’’ to clarify the and meetings with various industry HUD proposed to revise the parameters of rural underserved areas. trade groups and non-profit definitions of ‘‘median income,’’ The definition under HUD’s 1995 final organizations to discuss the provisions ‘‘metropolitan area,’’ and ‘‘underserved rule omitted the requirement for a of the proposed rule. These sessions are area’’ in order to provide greater clarity, comparison between the ‘‘greater of the described below. Further, additional consistency and technical guidance. The State non-metropolitan median income information on these meetings is few comments received on these or nationwide non-metropolitan median contained in the public docket file of definitions were supportive of the income’’ from the ‘‘income/minority’’ this rule in Room 10276 at HUD proposed technical changes. HUD also provision even though it had provided Headquarters. proposed certain changes to several for this comparison when qualifying a. Forums. The Department aspects of the definition of underserved mortgage purchases under the ‘‘income- conducted two forums designed to give area to solicit public input on how best only’’ provision. HUD proposed to add participants an in-depth look at how to identify the areas that are the comparative language to the well the GSEs are supporting affordable underserved by the mortgage credit ‘‘income/minority’’ provision for rural housing activities in local communities. markets. underserved areas. The revision applies One forum was held in Hartford, the same median income standard to Connecticut and the other in Durham, 1. Median Income both the ‘‘income-only’’ and the North Carolina. Each forum had HUD proposed to change the ‘‘income/minority’’ definitions. HUD approximately 125 participants. In definition of ‘‘median income’’ to has implemented this change in § 81.2 addition to sessions held at both forums require the GSEs to use HUD estimates of this final rule. (HUD also proposed that reviewed the GSEs’ progress in of median family income to further other changes to the definition of meeting the affordable housing needs in clarify the appropriate process for the ‘‘underserved areas.’’ These are the respective region, each forum had a GSEs’ determination of area incomes. discussed in Subpart B—Housing session that addressed issues and needs HUD has implemented this change in Goals.) specific to the region. In Hartford, a this final rule. As part of this change to b. Other Changes Proposed and/or session was held on the role of the definition of ‘‘median income,’’ Comments Requested. The proposed multifamily housing in meeting HUD will provide the GSEs, on an rule described additional changes to the affordable housing needs. Research was annual basis, information specifying definition of underserved area relating presented on how small multifamily how HUD’s published median family to tribal lands and requested comments properties disproportionately serve low- income estimates are to be applied. This on possible changes to the income and income families and data was provided change is needed because, in some minority requirements of the definition. on the extent of the GSEs’ purchases of cases, HUD publishes area median (1) Tribal Lands. HUD proposed to mortgages on small multifamily family income estimates for portions of revise the definition of ‘‘underserved properties. Panel members discussed areas rather than whole metropolitan areas’’ in § 81.2 to designate all the unique problems of financing small statistical areas (MSAs) or primary qualifying Indian reservations and trust multifamily properties and how Fannie metropolitan statistical areas (PMSAs). lands as underserved areas. Mae and Freddie Mac can better serve c. Summary of Comments. Fannie these markets. In Durham, a session was 2. Metropolitan Area Mae stated that it is ‘‘particularly held on predatory lending. Panel HUD proposed to clarify the appropriate’’ to include these lands in members identified abusive practices definition of ‘‘metropolitan area’’ by the definition of underserved areas. and discussed the impacts that revising the description of the relevant Fannie Mae added that it ‘‘does not predatory lenders were having area for determining median incomes to think it is feasible, practical, or particularly on the elderly and in eliminate the reference in § 81.2 to appropriate to split trust lands between minority neighborhoods. Serious consolidated metropolitan statistical served and underserved designations, questions were raised as to whether areas (CMSAs). HUD has implemented depending on the designation of the Fannie Mae and Freddie Mac should be this change in the final rule. surrounding tracts or counties.’’ Fannie involved in this market. ‘‘Metropolitan area’’ was defined in Mae further commented that HUD’s b. Subject Matter Meetings. HUD also § 81.2 under the 1995 final rule as an proposal could lead to ‘‘split or held three smaller discussion group MSA, a PMSA, or a CMSA, designated proportional treatment of any one trust sessions designed to address specific by the Office of Management and land,’’ and that such areas should be
VerDate 112000 18:02 Oct 30, 2000 Jkt 194001 PO 00000 Frm 00006 Fmt 4701 Sfmt 4700 E:\FR\FM\31OCR2.SGM pfrm08 PsN: 31OCR2 Federal Register / Vol. 65, No. 211 / Tuesday, October 31, 2000 / Rules and Regulations 65049 included as underserved areas ‘‘without Fannie Mae’s recommendation would, it would not be appropriate to make regard to income or minority status.’’ in a small but significant number of such a change at this time. Rather, they Fannie Mae added that HUD should instances, substantially breach the suggested that the Department wait until consider postponing this change until principle that underserved areas are updated information from the 2000 ‘‘the new boundary files and data files’’ areas with low median incomes and/or Census is available to analyze. The become available from the 2000 Census. high minority concentrations, as Department agrees that, with more Fannie Mae further stated that HUD’s established in the 1995 Final Rule. current information to become available proposal to define some underserved Accordingly, HUD has not implemented from the 2000 Census in the near future, areas in terms of income and minority Fannie Mae’s recommendation. the timing is not optimal to make a composition for the balance of a county HUD believes that designating entire change in the underserved areas or census tract excluding the area tracts or counties that contain qualifying designation. Once information from the within any Federal or State American tribal lands as underserved areas is not 2000 Census is available, the Indian reservation or tribal or individual appropriate. The purpose of the Department will determine whether this trust land ‘‘raises operational issues that definitional change in underserved proposal merits consideration. will be difficult to overcome.’’ areas to include all tribal lands is to (3) Minority Composition. Similarly, Freddie Mac stated that ‘‘In principal focus attention on the mortgage the proposed rule requested comment [sic], Freddie Mac has no objection to financing needs of Native American on another approach to target high treating an American Indian Reservation communities. By designating the entire mortgage denial rate areas. The or tribal land as a geographic whole’’ for county or census tract as underserved alternative approach would be to determining underserved areas. It by virtue of the presence of tribal lands increase the minority component added, however, that ‘‘adoption of a in a portion of it, this focus is lost. HUD required to identify an area as definition that would involve geocoding believes that any geocoding problems underserved by increasing the rural loans at the subcounty level could arising from this proposal can be requirement from 30 percent to 50 present formidable practical problems.’’ resolved. HUD will issue operational percent minority. Several commenters Freddie Mac recommended that HUD guidance on this matter prior to the noted that increasing the minority ‘‘designate entire tracts in metropolitan effective date of this final rule. component of a census tract to qualify areas and entire counties in HUD believes that underserved areas as underserved would have a nonmetropolitan areas that contain must have relatively fixed definitions— disproportionately negative impact on qualifying reservations and trust lands tribal service areas are evolving over the Hispanic population. Commenters as underserved.’’ time. The underserved areas goal is observed that Hispanic residential living Other commenters were generally defined broadly by both geographic and patterns are not as concentrated as those supportive of the Department’s area wide demographic features so that of other minority groups. In addition, proposal. One commenter called for an borrowers living in underserved areas comments were provided suggesting expansion of the proposal to include benefit from the increased attention that any changes in this area be tribal service areas and urban living paid to lending in such areas as a result considered once data from the 2000 Native Americans. of HUD’s geographic goal. Census is available before making a final d. HUD’s Determination. HUD (2) Enhanced Tract Definition. In the determination in this regard. The believes that treating tribal lands as proposed rule, comments were sought Department has determined that it will separate geographic entities implies that on possible changes to the current obtain and analyze 2000 Census data the balance of counties or tracts metropolitan underserved areas and consider various minority excluding such areas would logically be definition to better target underserved population patterns and their treated as separate entities, but it areas with higher mortgage denial rates recognizes Fannie Mae’s argument that and thereby promote better access to relationship to the availability of this could raise ‘‘operational issues.’’ mortgage credit for these areas. mortgage credit before deciding whether HUD will issue operational guidance on Specifically, HUD proposed changing this proposal continues to merit this matter prior to the effective date of the current tract income ratio to an consideration. (4) Rural Areas. The proposed rule this Final Rule. ‘‘enhanced’’ tract income ratio requiring requested comments on how best to HUD evaluated Fannie Mae’s that for tracts to qualify as underserved define underserved rural areas, posing recommendation to classify all they must have a tract income ratio at American Indian and Alaskan Native or below the maximum of 80 percent of questions on whether the underserved (AIAN) areas as underserved areas, area median income or 80 percent of rural areas should be identified by without regard to income or minority U.S. median income in metropolitan census tract or by county. HUD received status, in light of the problems involved areas. The proposed change would make comments that supported both in obtaining a mortgage on even the very the underserved areas definition used approaches. Again, the commenters few higher-income (or low minority) by the GSEs consistent with the raised the issue of the 2000 Census. tribal lands. HUD analyzed data on 1989 requirements of Federally insured Consistent with the Department’s other median incomes and minority depository institutions under the determinations regarding significant concentrations for AIAN areas provided Community Reinvestment Act (CRA). changes to the definition of underserved by the U.S. Bureau of the Census. HUD’s The Department believes the concept areas, HUD will not make any changes analysis showed that, out of 248 AIAN has substantial merit, and there was a at this time in defining underserved areas with sufficient population to sizeable group of commenters that rural areas and will wait for the determine an area median family supported the concept, at least in part. opportunity to analyze the data from the income, 19 areas, or 6.7 percent, would However, there were a number of 2000 Census. be classified as served and 265 areas, or commenters, including the GSEs, that C. Subpart B—Housing Goals 93.3 percent, as underserved. The 19 said that since the redesignation of areas include some with very low census tracts as underserved would be 1. Overview minority concentrations and some with based on data from the 1990 Census, Comments received overwhelmingly very high median incomes. HUD and since data from the 2000 Census supported the Department’s proposal to concludes that implementation of would not be available for a few years, increase the level of the affordable
VerDate 112000 18:02 Oct 30, 2000 Jkt 194001 PO 00000 Frm 00007 Fmt 4701 Sfmt 4700 E:\FR\FM\31OCR2.SGM pfrm08 PsN: 31OCR2 65050 Federal Register / Vol. 65, No. 211 / Tuesday, October 31, 2000 / Rules and Regulations housing goals. Both GSEs commented particularly African-American and The GSEs can play a role in that, while meeting these goals will be Hispanic families, lagging the overall promoting liquidity for multifamily a challenge (particularly the market in rate of homeownership. In mortgages and increasing the Underserved Areas Goal), they are addition, there is evidence that the availability of long-term, fixed rate committed to doing so. While some aging stocks of single family rental financing for these properties. Increased commenters, including the GSEs, properties and small multifamily GSE presence would provide greater expressed concern that the market properties with 5–50 units, which play liquidity to lenders, i.e., a viable ‘‘exit scenarios used by HUD did not a key role in lower-income housing, strategy,’’ that in turn would serve to adequately consider an economic have experienced difficulties in increase their lending. It appears that downturn, those commenters still felt obtaining financing. The ability of the the financing of small multifamily rental that higher goals levels were nation to maintain the quality and properties with 5–50 units, where a appropriate. This section of the final availability of the existing affordable substantial portion of the nation’s rule reviews the statutory factors the housing stock and to stabilize affordable housing stock is Department must consider in setting the neighborhoods depends on an adequate concentrated, have been adversely level of the housing goals, specific supply of affordable credit to affected by excessive borrowing costs. comments on the housing goals rehabilitate and repair older units. Multifamily properties with significant including the market methodology, and (1) Single Family Mortgage Market. rehabilitation needs also appear to have the determination made with regard to Many younger, minority, and lower- experienced difficulty gaining access to the level for each of the housing goals. income families did not become mortgage financing. Moreover, the flow homeowners during the 1980s due to of capital into multifamily housing for 2. Statutory Considerations in Setting the slow growth of earnings, high real seniors has been historically the Level of the Housing Goals interest rates, and continued house characterized by a great deal of In establishing the housing goals, price increases. Over the past several volatility. FHEFSSA requires the Department to years, economic expansion, b. Economic, Housing, and consider six factors—national housing accompanied by low interest rates and Demographic Conditions. Studies needs; economic, housing and increased outreach on the part of the indicate that changing population demographic conditions; performance mortgage industry, has improved demographics will result in a need for and effort of the GSEs toward achieving affordability conditions for lower- the mortgage market to meet the goal in previous years; size of the income families. Between 1994 and nontraditional credit needs and to conventional mortgage market serving 1999, record numbers of lower-income respond to diverse housing preferences. the targeted population or areas, relative and minority families purchased homes. The U.S. population is expected to grow to the size of the overall conventional First time homeowners have become a by an average of 2.4 million persons per mortgage market; ability of the GSEs to major driving force in the home year over the next 20 years, resulting in lead the industry in making mortgage purchase market over the past five 1.1 to 1.2 million new households per credit available for the targeted years. Thus, the 1990s have seen the year. In particular, the continued influx population or areas; and the need to development of a strong affordable of immigrants will increase the demand maintain the sound financial condition lending market. Despite the growth of for rental housing while those who of the GSEs. These factors are discussed lending to minorities, disparities in the immigrated during the 1980s will be in in more detail in the following sections mortgage market remain. For example, the market to purchase owner-occupied of this preamble and in the Appendices African-American applicants are still housing. The aging of the baby-boom to this rule. A summary of HUD’s twice as likely to be denied a loan as generation and the entry of the small findings relative to each factor follows: white applicants, even after controlling baby-bust generation into prime home a. National Housing Needs. Analysis for income. buying age is expected, however, to and research by HUD and others in the (2) Multifamily Mortgage Market. result in a lessening of housing demand. housing industry indicate that there are, Since the early 1990s, the multifamily Non-traditional households have, and and will continue to be in the mortgage market has become more will, become more important as overall foreseeable future, substantial unmet closely integrated with global capital household formation rates slow down. housing needs among lower-income and markets, although not to the same With later marriages, divorce, and non- minority families. Data from the degree as the single family mortgage traditional living arrangements, the American Housing Surveys demonstrate market. Loans on multifamily properties fastest growing household groups have that there are substantial unmet housing are still viewed as riskier by some than been single parent and single person needs among lower-income families. mortgages on single family properties. households. With continued house price Many households are burdened by high Property values, vacancy rates, and appreciation and favorable mortgage homeownership costs or rent payments market rents of multifamily properties terms, ‘‘trade-up buyers’’ will also and will likely continue to face serious appear to be highly correlated with local increase their role in the housing housing problems, given the dim job market conditions, creating greater market. There will also be increased prospects for earnings growth in entry- sensitivity of loan performance to credit needs from new and expanding level occupations. According to HUD’s economic conditions than may be market sectors, such as manufactured ‘‘Worst Case Housing Needs’’ report, 21 experienced for single family mortgages. housing and housing for senior citizens. percent of owner households faced a There is a need for an on-going GSE These demographic trends will lead to moderate or severe cost burden in 1997. presence in the multifamily secondary greater diversity in the homebuying Affordability problems were even more market both to increase liquidity and to market, which, in turn, will require common among renters, with 40 percent further affordable housing efforts. The greater adaptation by the primary and paying more than 30 percent of their potential for an increased GSE presence secondary mortgage markets. income for rent in 1997.16 is enhanced by the fact that an As a result of the above demographic Despite the growth during the 1990s increasing proportion of multifamily forces, housing starts are expected to in affordable housing lending, mortgages are now originated in average 1.5 million units annually disparities in the mortgage market accordance with secondary market between 2000 and 2003, essentially the remain, with certain minorities, standards. same as in 1996–99.17 Refinancing of
VerDate 112000 18:02 Oct 30, 2000 Jkt 194001 PO 00000 Frm 00008 Fmt 4701 Sfmt 4700 E:\FR\FM\31OCR2.SGM pfrm08 PsN: 31OCR2 Federal Register / Vol. 65, No. 211 / Tuesday, October 31, 2000 / Rules and Regulations 65051 existing mortgages, which accounted for the market, but have lagged behind the mortgage loans originated and retained 50 percent of originations in 1998 and primary market in financing housing for by depository institutions, and 13.3 34 percent in 1999, is expected to return lower-income families and housing in percent of such mortgage loans to lower levels during 2000. The underserved areas. However, the GSEs’ originated in the overall conventional, mortgage market remained strong with state-of-the-art technology, staff conforming market. Similarly, mortgage $1.3 trillion dollars in originations resources, share of the total purchases on properties located in during 1999. A lower number of conventional, conforming market, and underserved areas accounted for 20.0 originations is expected in 2000 with their financial strength suggest that the percent and 22.5 percent of Freddie approximately $962 billion in GSEs have the ability to lead the Mac’s and Fannie Mae’s purchases of originations being projected by the industry in making mortgage credit home purchase loans, respectively, 26.1 Mortgage Bankers Association of available for lower-income families and percent of home purchase mortgages America. underserved neighborhoods. originated and retained by depository c. Performance and Effort of the GSEs The legislative history of FHEFSSA institutions and 24.6 percent of home Toward Achieving the Goal in Previous indicates Congress’s strong concern that purchase mortgages originated in the Years. Both Fannie Mae and Freddie the GSEs need to do more to benefit overall conventional, conforming Mac have improved their affordable low- and moderate-income families and market. housing loan performance since the residents of underserved areas that lack Between 1993 and 1998, Fannie Mae 18 enactment of FHEFSSA in 1992 and access to credit. The Senate Report on improved its affordable lending HUD’s establishment of housing goals FHEFSSA emphasized that the GSEs performance and made progress toward under the law. However, the GSEs’ should ‘‘lead the mortgage finance closing the gap between its performance mortgage purchases continue to lag the industry in making mortgage credit and that of the overall mortgage market. overall market in providing financing available for low- and moderate-income 19 During that period Freddie Mac showed for affordable housing to low- and families.’’ FHEFSSA, therefore, less improvement and, as a result, did moderate-income families, underserved specifically required that HUD consider not make as much progress in closing borrowers and their neighborhoods, the ability of the GSEs to lead the the gap between its performance and indicating that there is more that the industry in establishing the level of the that of the overall market for home GSEs can do to improve their housing goals. FHEFSSA also clarified loans. However, during 1999, Freddie performance. In addition, a large the GSEs’ responsibility to complement Mac’s purchases of goals qualifying percentage of the lower-income loans the requirements of the Community home loans increased significantly purchased by the GSEs have relatively Reinvestment Act 20 and fair lending relative to Fannie Mae’s purchases and, high down payments, which raises laws 21 in order to expand access to as a result Freddie Mac now matches or questions about whether the GSEs are capital to those historically underserved out-performs Fannie Mae in several adequately meeting the needs of those by the housing finance market. affordable lending categories. For lower-income families who have little While leadership may be exhibited example, during 1999, very low-income cash for making large down payments through the GSEs’ introduction of borrowers accounted for 11.0 percent of but can fully meet their monthly innovative products, technology, and Freddie Mac’s purchases of home loans payment obligations. The discussion of processes and through establishing in metropolitan areas, compared with the performance and effort of the GSEs partnerships and alliances with local 10.8 percent of Fannie Mae’s. Similarly, toward achieving the housing goals in communities and community groups, previous years is specific to each of the leadership must always involve mortgages on properties in underserved three housing goals. This topic is increasing the availability of financing census tracts accounted for 21.2 percent discussed below and further details are for homeownership and affordable of Freddie Mac’s acquisitions of home provided in the Appendices to this rule. rental housing. Thus, the GSEs’ purchase mortgage loans in d. Size of the Mortgage Market obligation to lead the industry entails metropolitan areas, compared with 20.6 Serving the Targeted Population or leadership in facilitating access to percent of Fannie Mae’s. The extent to Areas, Relative to the Size of the Overall affordable credit in the primary market which Freddie Mac has closed its Conventional, Conforming Mortgage for borrowers at different income levels performance gap relative to depositories Market. The Department’s analyses and housing needs, as well as for and the overall market will be clarified indicate that the size of the underserved urban and rural areas. once HUD has the opportunity to conventional, conforming market While the GSEs cannot be expected to analyze 1999 HMDA data for relative to each housing goal is greater solve all of the nation’s housing metropolitan areas. than earlier estimates (based mainly on problems, the efforts of Fannie Mae and The Department estimates the GSEs HMDA data for 1992 through 1994) used Freddie Mac have not matched the provided financing for 55 percent of in establishing the 1996–1999 housing opportunities that are available in the units financed by conventional, goals. The discussion of the size of the primary mortgage market. Although the conforming mortgages in 1998.22 conventional mortgage market serving GSEs were directed by Congress to lead However, the GSEs’ mortgage market targeted populations or areas relative to the mortgage finance industry in making presence varies significantly by property the size of the overall conventional, mortgage credit available for low- and type. While the GSEs accounted for conforming mortgage market is specific moderate-income families, depository about 68 percent of the owner-occupied to each of the three housing goals. The and other lending institutions have been units financed in the primary market in Department’s estimate of the size of the more successful than the GSEs in that year, their role was much less in the conventional mortgage market is providing affordable loans to lower- market for mortgages on rental discussed below and further details are income borrowers and in historically properties. Specifically, HUD estimates provided in the Appendices to this rule. underserved neighborhoods. In 1998 for that Fannie Mae and Freddie Mac e. Ability of the GSEs To Lead the example, very low-income borrowers accounted for only about 24 percent of Industry in Making Mortgage Credit accounted for 9.9 percent of Freddie rental units financed in 1998. Thus, the Available for the Targeted Population or Mac’s acquisitions of home purchase GSEs’ presence in the rental mortgage Areas. Research concludes that the mortgage loans, 11.4 percent of Fannie market was well under half their GSEs have generally not been leading Mae’s acquisitions, 15.2 percent of such presence in the market for mortgages on
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The contrast, GSE purchases comprised only Increased purchases of small GSEs have yet to play a major role in 44 percent of the low- and moderate- multifamily mortgages would make a financing mortgages for rental units in income mortgage market in 1998, 46 significant contribution to performance single family rental properties (those percent of the underserved areas market, under the goals, since the percentages of with at least one rental unit and no and, a still smaller, 33 percent of the these units qualifying for the income- more than four units in total), where special affordable market. As discussed based housing goals are high—in 1999, their market share was only 19 percent. above, the GSE presence in mortgage 95 percent of units backing Fannie As noted above, the GSEs continue to markets for rental properties, where Mae’s multifamily mortgage transactions lag the overall conforming, conventional much of the nation’s affordable housing qualified for the Low- and Moderate- market in providing affordable home is concentrated, is far below that in the Income Housing Goal, with a purchase loans to lower-income families single family owner-occupied market. corresponding figure of 90 percent for and for properties in underserved The GSEs’ role in the mortgage market Freddie Mac. That year, 43 percent of neighborhoods. Additionally, a large varies somewhat from year to year in units backing Freddie Mac’s multifamily percentage of the lower-income loans response to changes in interest rates, transactions qualified for the Special purchased by both GSEs have relatively mortgage product types, and a variety of Affordable Housing Goal, with a high down payments, which raises other factors. Underlying market trends, corresponding figure of 56 percent for questions about whether the GSEs are however, show a clear and significant Fannie Mae. adequately meeting the needs of those increase in the GSEs’ role. Specifically, (2) Multifamily Rehabilitation Loans. lower-income families who find it OFHEO estimates that the share (in Another multifamily market segment difficult to raise enough cash for a large dollars) of single family mortgages holding potential for expanded GSE down payment. Also, while rental outstanding accounted for by mortgage- presence involves properties with properties are an important source of backed securities issued by the GSEs significant rehabilitation needs. low- and moderate-income rental and by mortgages held in the GSEs’ Properties that are more than 10 years housing, they represent only a small portfolios has risen from 31 percent in old are typically classified as ‘‘C’’ or portion of the GSEs’ business. 1990 to 42 percent in 1999. In absolute ‘‘D’’ properties, and are considered less The appendices to this rule provide terms, the GSEs’ presence has grown attractive than newer properties by more information on HUD’s analysis of even more sharply, as the total volume many lenders and investors. the extent to which the GSEs have of single family mortgage debt Multifamily rehabilitation loans lagged the mortgage industry in funding outstanding has increased rapidly over accounted for only 0.5 percent of units loans to underserved borrowers and this period. backing Fannie Mae’s 1998 mortgage neighborhoods. From this analysis of The GSEs have indicated that they purchases and for 1.6 percent in 1999. the GSEs’ performance in comparison expect their role in the mortgage market These loans accounted for 1.9 percent of with the primary mortgage market and to continue to increase in the future, as Freddie Mac’s 1998 multifamily with other participants in the mortgage they develop new products, refine mortgage purchase total (with none markets, it is clear that the GSEs need existing products, and enter markets indicated in 1999). to improve their performance relative to where they have not played a major role (3) Single Family Rental Properties. the primary market of conventional, in the past. The Department’s housing Studies show that single family rental conforming mortgage lending. The need goals for the GSEs also anticipate that properties are a major source of for improvements in the GSEs’ their involvement in the mortgage affordable housing for lower-income performance is especially apparent with market will continue to increase. families, yet these properties are only a respect to the single family and There are a number of segments of the small portion of the GSEs’ overall multifamily rental markets. multifamily, single family owner, and business. f. Need To Maintain the Sound single family rental markets that the HUD estimates that approximately Financial Condition of the GSEs. Based GSEs have not tapped in which the 203,000 mortgages were originated on on HUD’s economic analysis and GSEs might play an enhanced role owner-occupied single family rental discussions with the Office of Federal thereby increasing their shares of properties in 1998. These mortgages Housing Enterprise Oversight, HUD has targeted loans and their performance financed a total of 458,000 units—the concluded that the level of the goals as under the housing goals. Six such areas owners’ units plus an additional proposed would not adversely affect the are discussed below. 254,000 rental units.23 Data submitted to sound financial condition of the GSEs. (1) Small Multifamily Properties. One HUD by the GSEs indicate that, in 1998, Further discussion of this issue is found sector of the multifamily mortgage together the GSEs acquired mortgages in Appendix A. market where the GSEs could play an backed by 188,000 such units, 41 enhanced role involves loans on small percent of the number of units financed 3. Determinations Regarding the Level multifamily properties—those in the primary market, well below the of the Housing Goals containing 5–50 units. These loans GSEs’ overall 1998 market share of 55 There are several reasons the account for 39 percent of the units in percent.24 Department, having considered all the recently mortgaged multifamily There is ample room for an enhanced statutory factors, is increasing the level properties, according to the 1991 Survey GSE role in this goal-rich market. For of the housing goals. of Residential Finance. However, the the GSEs combined, 65 percent of the a. Market Needs and Opportunities. GSEs typically purchase relatively few units in these properties qualified for First, the GSEs appear to have of these loans. HUD estimates that the the Low- and Moderate-Income Housing substantial room for growth in serving GSEs acquired loans financing only Goal in 1999, 32 percent qualified for the affordable housing mortgage market. three percent of units in small the Special Affordable Housing Goal, For example, as discussed above, the multifamily properties originated during and 54 percent qualified for the
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Geographically Targeted Goal. Thus, would qualify for a prime conventional needed liquidity for a market that is significant gains could be made in loan. Fannie Mae Chairman Franklin serving the needs of low-income and performance on all of the goals if Fannie Raines has stated that half of all minority homeowners. Mae and Freddie Mac played a larger mortgages in the high cost subprime (7) Lending to Minority Borrowers. role in the market for mortgages on market are candidates for purchase by The GSEs have an opportunity to play single family owner-occupied rental Fannie Mae. Both Fannie Mae and a leadership role in making mortgage properties (two to four units). Freddie Mac recently introduced credit more widely available to African (4) Manufactured Homes. The programs aimed at borrowers with past American and other minority borrowers, Manufactured Housing Institute, in its credit problems that would lower the who represent yet another underserved Annual Survey of Manufactured Home interest rates for those borrowers that market. In 1998, for example, African Financing, reported that 116 reporting were timely on their mortgage American borrowers accounted for five institutions originated $15.6 billion in payments. Freddie Mac has also percent of conventional, conforming consumer loans on manufactured homes purchased subprime loans through single family mortgage loans originated in 1998, and that, with an average loan structured transactions that limit in metropolitan areas, as shown in amount of about $30,000, approximately Freddie Mac’s risk to the ‘‘A’’ piece of Appendix A.26 By contrast, African 520,000 loans were originated. a senior-subordinated transaction. American borrowers accounted for only While the GSEs have traditionally However, there may be ample room 3.1 percent of Fannie Mae’s played a minimal role in financing for further enhancement of both GSEs’ metropolitan area mortgage purchases manufactured housing, they have roles in the A-minus market. A larger and three percent of Freddie Mac’s recently stepped up their activity in this role by the GSEs might help standardize mortgage purchases. Hispanic borrowers market. However, even with their mortgage terms in this market, possibly accounted for 5.2 percent of the increased level of activity, the GSEs’ leading to lower interest rates. metropolitan area conventional, purchases probably accounted for less (6) Seasoned Mortgages. Over the past conforming mortgage market in 1998, than 15 percent of total loans on five years, depository institutions (banks 4.8 percent of Fannie Mae’s mortgage manufactured homes in 1998—a figure and thrifts) have been expanding their purchases and 4.4 percent of Freddie well below their overall market affordable loan programs and, as a Mac’s mortgage purchases.27 presence of 55 percent. result, have originated substantial b. Market Share Higher than Goal There is ample room for an enhanced numbers of loans to low-income and Levels. The shares of the mortgage GSE role in this market, with its high minority borrowers and to low-income markets that would qualify for each of concentration of goals qualifying and predominantly minority the housing goals are higher than the mortgage loans. In 1998, for loans neighborhoods, under the incentive of goal levels as they were set through reported by 21 manufactured housing the Community Reinvestment Act 1999. Specifically, the Low- and lenders (that are required by HMDA to (CRA),25 which requires many Moderate-Income Housing Goal for 1997 report loan data), 76 percent qualified depository institutions to help meet the through 1999 was 42 percent, but the for the Low- and Moderate-Income credit needs of their communities. As market share for low- and moderate- Housing Goal in 1998, 42 percent the GSEs noted in their comments, some income mortgages has been estimated at qualified for the Special Affordable of these loans, when originated, may not 50–55 percent. The Geographically Housing Goal, and 47 percent qualified have met the GSEs’ underwriting Targeted Goal for 1997 through 1999 for the Geographically Targeted Goal. guidelines. A large number of the ‘‘CRA- was 24 percent, but the estimated Thus, manufactured housing has type’’ loans that have been recently market share of geographically targeted significantly higher shares of goal originated remain in thrift and bank mortgages has been estimated at 29–32 qualifying loans than all single family portfolios; selling these loans on the percent. The Special Affordable owner-occupied properties, though secondary market would free up capital Housing Goal for 1997 through 1999 purchases of these loans are not quite as for depositories to originate new CRA was 14 percent, but the estimated goal-rich as loans on multifamily loans. Given its enormous size, the CRA special affordable market share is 23–26 properties. In general, goal performance market segment provides an opportunity percent.28 Thus, the increases in the could be enhanced substantially if the for Fannie Mae and Freddie Mac to housing goals implemented in this final GSEs were to play an increased role in expand their affordable housing rule and described below will the manufactured housing mortgage financing programs. The Department significantly reduce the disparities that market. recognizes that purchasing these loans existed between the previous housing (5) A-minus Loans. Industry sources may present some challenges for the goals and HUD’s market estimates. estimate that subprime mortgage GSEs. However, it appears these loans HUD’s analysis indicates that the goal originations amounted to about $160 are beginning to be purchased by GSEs levels established in the final rule are billion in 1999, and that these loans are after the loans have seasoned and reasonable and feasible and that its divided evenly between the more through various structured transactions. market estimates reflect significantly creditworthy (‘‘A-minus’’) borrowers As explained in Appendix A, Fannie more adverse economic environments and less creditworthy (‘‘B,’’ ‘‘C,’’ and Mae’s purchases of seasoned loans than have recently existed. Reasons for ‘‘D’’) borrowers. Based on HMDA data improved its performance on the the remaining disparity between the for 200 subprime lenders, the housing goals in 1997 and 1998. GSE housing goals established in this Department estimates that 58 percent of Seasoned loan purchases did not have a final rule and the respective shares of the units financed by subprime loans similar impact in 1999. Freddie Mac, on the overall mortgage market qualifying qualified for the Low- and Moderate- the other hand, has not been as active for each of the housing goals are Income Housing Goal in 1998, 29 as Fannie Mae in purchasing seasoned discussed below. See Appendix D for percent qualified for the Special CRA type loans. With billions of dollars further discussion of these issues. Affordable Housing Goal, and 45 worth of CRA loans in bank portfolios, c. Need for Increased Affordable percent qualified for the Geographically the early experience of Fannie Mae Single Family Mortgage Purchases. Targeted Goal. suggests that purchasing these loans Higher housing goals are needed to Freddie Mac has estimated that 10 to could be an important strategy for assure that both Fannie Mae and 30 percent of subprime borrowers reaching the housing goals and provide Freddie Mac increase their purchases of
VerDate 112000 18:02 Oct 30, 2000 Jkt 194001 PO 00000 Frm 00011 Fmt 4701 Sfmt 4700 E:\FR\FM\31OCR2.SGM pfrm08 PsN: 31OCR2 65054 Federal Register / Vol. 65, No. 211 / Tuesday, October 31, 2000 / Rules and Regulations single family mortgages for lower- market, such as rehabilitation of older properties with more than 50 units income families. The GSEs lag behind two- to four-unit properties, could be under the 2001–2003 goals as it depository institutions and other helped by new mortgage products and continues to increase its multifamily lenders in the conventional, conforming more flexibility in underwriting and mortgage purchases, as discussed in market in providing mortgage funds for appraisal guidelines. The GSEs, along more detail, below. underserved families and their with primary lenders and private f. Financial Capacity to Support neighborhoods. Numerous studies have mortgage insurers, have been making Affordable Housing Lending. A wide concluded that Fannie Mae and Freddie efforts to reach out to these underserved Mac have room to increase their portions of the markets. However, more variety of quantitative and qualitative purchases of affordable loans originated needs to be done, and the proposed indicators demonstrate that the GSEs’ by primary lenders. The single family increases in the housing goals are have ample, indeed robust, financial affordable market, which had only intended to encourage additional efforts strength to improve their affordable begun to grow when HUD set housing by Fannie Mae and Freddie Mac. lending performance. For example, the goals in 1995, has now established itself e. Impact of Multifamily Mortgage combined net income of the GSEs has with seven straight years (1993–1999) of Purchases. When the 1996–99 goals risen steadily over the last decade, from solid performance. Current projections were established in December 1995, $677 million in 1987 to over six billion suggest that the demand for affordable Freddie Mac had only recently dollars in 1999. This financial strength housing by minorities, immigrants, and reentered the multifamily mortgage provides the GSEs with the resources to non-traditional households will be market, after an absence from the market lead the industry in making mortgage maintained in the post-1999 period, in the early 1990s. Freddie Mac has financing available for families and leading to additional opportunities for made progress in rebuilding its neighborhoods targeted by the housing the GSEs to support mortgage lending multifamily mortgage purchase goals. program, with its purchases of these benefiting families targeted by the g. Closing the Gap Between the GSEs housing goals. loans rising from $191 million in 1993 and the Market. This section discusses d. Market Disparities. Despite the to $7.6 billion in 1999. Freddie Mac’s recent growth in affordable lending, limited role in the multifamily market the relationship between the housing there are many groups who continue to was a significant constraint when HUD goals, the GSEs’ performance and HUD’s face problems obtaining mortgage credit set the level of the housing goals for market estimates; and identifies key and who would benefit from a more 1996 through 1999. While Freddie Mac segments of the affordable market in active and targeted secondary market. has made progress in recent years in which the GSEs have had only a weak Homeownership rates for lower-income significantly increasing its multifamily presence. To lay the groundwork for this families, certain minorities, and central mortgage purchases, Freddie Mac’s discussion, the following table city residents are substantially below smaller multifamily portfolio relative to summarizes the Department’s findings those of other families, and the that of Fannie Mae has meant fewer regarding GSE performance under the disparities cannot simply be attributed refinance opportunities from within its 1997–2000 goals and the new goal levels to differences in income. Immigrants portfolio. Accordingly, the Department for 2001–2003 as compared to HUD’s represent a ready supply of potential is providing Freddie Mac with a estimates for 1995–1998 markets as well first-time home buyers and need access temporary adjustment factor for as HUD’s projected market estimates for to mortgage credit. Special needs in the purchases of mortgages in multifamily 2001–2003:
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It is evident from this table that the of units in small multifamily properties segments are important components in new goal levels for the Low- and mortgaged that year. Figure 2 provides the market estimate. In the overall Moderate-Income Housing Goal and additional detail providing unit data conventional, conforming mortgage Special Affordable Housing Goal are comparing the GSEs’ with the market, rental units in single family below HUD’s projected market estimate conventional, conforming market. properties and in small multifamily for the years covered by the new Typically, about 90 percent of rental properties are expected to represent housing goals. One reason for this units in single family rental and small approximately 21 percent of the overall disparity can be discerned by multifamily properties qualify for the mortgage market, and 33 percent of disaggregating GSE purchases by Low- and Moderate-Income Housing units backing mortgages qualifying for property type, which shows that the Goal. One reason that the GSEs’ the Low- and Moderate-Income Housing GSEs have little presence in some performance under the Low- and Goal. Yet in 1999, units in such important segments of the affordable Moderate-Income Housing Goal falls properties accounted for 6.6 percent of housing market. For example, as shown short of HUD’s market estimate is that the GSEs’ overall purchases, and only in Figure 1, in 1998, the GSEs the GSEs have had only a weak and 11.5 percent of the GSEs’ purchases purchased loans representing only 19 inconsistent presence in financing these meeting the Low- and Moderate-Income percent of rental units in single family important sources of affordable housing, Housing Goal. The continuing weakness rental properties, and only three percent notwithstanding that these market in GSE purchases of mortgages on single
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4. Summary of Comments on HUD’s conventional, conforming mortgage GSE objected to HUD’s basic approach Analysis of Statutory Factors market. Section A of Appendices A, B to calculating these market shares, and C and Section B of Appendix D HUD received several comments on which involves estimating (1) the share the factors for determining the goal provide a more extensive discussion of of the market (in dwelling units) by type levels. Fannie Mae and Freddie Mac HUD’s response to the various questions of property (single family owner- provided numerous technical comments raised by the GSEs about the factors for occupied, single family rental, and on HUD’s analyses in the appendices to determining the housing goals. multifamily), (2) the proportion of the proposed rule. Most of the a. Market Share Methodology. In dwelling units financed by mortgages comments focused on two related topics Appendix D, HUD estimates the for each type of property meeting each concerning HUD’s market methodology: following market shares for the three goal, and (3) projecting the size of the (a) HUD’s model for the determining the housing goals during 2001–2003: 50–55 total market by weighting each such market size for each of the three housing percent for the Low-Mod Goal, 23–26 goal share by the corresponding market goals; and (b) HUD’s analysis of the percent for the Special Affordable Goal, share. In fact, both Fannie Mae and GSEs’ performance in the single family and 29–32 percent for the Freddie Mac stated that HUD’s market owner-occupied portion of the Geographically Targeted Goal. Neither share model was a reasonable approach
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Freddie conclude that they match or exceed the housing goals, it is necessary to restrict Mac stated that the Department took the market in funding affordable loans. analyses of the mortgage market to the correct approach in estimating the size It should be noted that the GSEs conventional, conforming market for of the conventional, conforming market extend their criticism to other purposes of establishing the housing by examining several different data sets, researchers that have examined this goals. using alternative methodologies, and issue of their leading the market with As explained in Appendices A and D, conducting sensitivity analyses. Fannie HMDA and related data. Appendix A HUD is aware that the mortgage market Mae expressed similar sentiments summarizes findings of several research is dynamic in character and susceptible asserting that HUD’s model for assessing studies that have reached the same to significant changes in conditions that the size of the affordable housing market conclusion as HUD—that the GSEs have would affect the overall level of is reasonable. lagged the market in affordable lending affordable lending to lower-income Both GSEs were critical, however, of c. Volatility of the Mortgage Market. families. In response to concerns HUD’s implementation of its market Both GSEs claimed that HUD had not expressed about the volatility of the methodology. Their major comments on adequately considered the impact that mortgage markets over time, HUD has the market methodology fall into two changes in the national economy could estimated a range of market shares for general areas. First, the GSEs expressed have on the size of the affordable each of the housing goals for the years concern about HUD’s assumptions and lending market and that HUD should 2001–2003 of 50–55 percent for the use of specific data elements both in significantly lower its market estimates Low- and Moderate-Income Housing constructing the distribution of property to reflect adverse economic conditions. Goal, 23–26 percent for the Special shares among single family owner- The GSEs commented that HUD based Affordable Housing Goal, and 29–32 occupied, single family rental, and its market estimates on the unusually percent for the Geographically Targeted multifamily properties and in estimating favorable economic and housing market Goal—that reflect economic the goals qualifying shares for each conditions that have existed since 1995. environments significantly more property type. The GSEs contended that The GSEs relied on a Freddie Mac adverse than those which existed during HUD chose assumptions and data funded study by PriceWaterhouse- the period between 1995 and 1998, sources that resulted in an Coopers (PWC) which concluded that when the units financed in the overstatement of the market estimate for the low- and moderate-income share of conventional, conforming market each of the housing goals. In particular, the mortgage market was heavily meeting the Low- and Moderate-Income the GSEs claimed that HUD overstated influenced by interest rate movements Housing Goal averaged 56 percent, the the importance of rental properties (both and changes in the rate of economic Special Affordable Housing Goal, 28 single family and multifamily) in its growth.30 PWC claims that the low-mod percent, and the Geographically market model and overstated the Low- share of the market ranged from 35 Targeted Goal, 33 percent. and Moderate-Income, Special percent to 56 percent during the 1990s, HUD conducted detailed sensitivity Affordable, and Geographically Targeted with a mean of 46 percent. HUD’s analyses for each of the housing goals to shares of the single family owner analysis, on the other hand, finds that reflect affordability conditions that are market. Second, both GSEs argued that the low- and moderate-income share of less conducive to lower-income HUD’s market estimates depended the market averaged 53 percent during homeownership than those that existed heavily on a continuation of recent the 1990s. during the mid- to late-1990s. For conditions of economic expansion and In HUD’s view, a major shortcoming example, the low- and moderate-income low interest rates. According to the of the PWC report is that it percentage for single family home GSEs, HUD’s range of market estimates underestimates the size of the purchase loans can fall to as low as 34 did not include periods of adverse multifamily mortgage market by relying percent—or four-fifths of its 1995–98 economic and affordability conditions on multifamily originations reported in average of over 42 percent—before the such as those which existed in the early HMDA data. While HMDA is for many projected low- and moderate-income 1990s. purposes a preeminent data source on share of the overall market would fall b. GSEs’ Performance in Single Family single family lending, its usefulness as below 50 percent. Additional sensitivity Owner-Occupied Market. Both GSEs a multifamily data source is much more analyses examining recession and differed with HUD’s conclusions that limited due to severe underreporting of proportionately higher refinance they lag the conventional, conforming loan originations. Indeed, HMDA is not scenarios and varying other key market in funding mortgages for the widely used as a multifamily data assumptions, such as the size of the goals qualifying segments of the single source in published works by highly multifamily market, show that HUD’s family owner-occupied market. Rather, regarded independent researchers, nor market estimates consider a range of the GSEs hold strongly that they have by Fannie Mae in its comments mortgage market and affordability led the mortgage market, from both submitted in response to HUD’s conditions and provide a sound basis quantitative and qualitative proposed rule. for setting housing goals for the years perspectives. The GSEs expressed The discussion of single family 2001–03. concern about HUD’s assumptions and lending in the PWC document initially HUD recognizes that under certain treatment of HMDA data in estimating appears to contradict HUD’s analysis in adverse circumstances, the goals the goals qualifying shares for single Appendix D of the proposed rule, but qualifying market shares could fall family owner-occupied mortgages. The this is mainly because HUD’s analysis is below its estimates. However, as HUD GSEs assert that certain portions of the based upon the conforming, stated in its 1995 GSE Rule, while the conforming mortgage market (such as conventional mortgage market, whereas housing goals must be feasible, setting manufactured housing loans and PWC includes FHA loans and loans goals so that they can be met even under selected CRA loans)—those market above the conforming loan limit, at least the very worst of circumstances is segments where they have not been very in the same years.31 Because the GSEs unreasonable. As HUD stated in its 1995 active—should be excluded from HUD’s are prohibited from purchasing loans Final GSE Rule, policy should not be definition of the owner market. From above the conforming limit, and because based on market estimates that include their own analysis that excludes these HUD is directed by statute to focus on the worst possible economic scenarios.
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HUD believes that the range for the the data elements needed for its market the size of the multifamily market is an market shares should be broad enough model. In the appendices, HUD important determinant of the overall to reflect the likely scenarios including carefully defines the range of market shares for the housing goals, as an expected range of volatility in the uncertainty associated with each data estimated by HUD’s model. Both GSEs mortgage market over the period during source, pulls together estimates of commented that HUD overstated the which the new housing goals will be in important market parameters from role of multifamily financing, which effect. independent sources, and conducts they asserted led to HUD’s overstated FHEFSSA and HUD recognize that sensitivity analyses to show the effects estimated market shares. Freddie Mac conditions could change in ways that of various assumptions. In fact, Freddie and PriceWaterhouseCoopers, in would require revised expectations. Mac noted that ‘‘We support the particular, advocated the use of HMDA Thus, HUD is given the statutory Department’s approach for addressing data for measuring the size of the discretion to revise the goals if the need the empirical challenges of setting the multifamily market. arises. Further, current regulations goals by examining several different As explained in Appendix D, HUD require that, if a GSE fails or if there is data sets, using alternative disagrees with Freddie Mac’s and PWC’s a substantial probability that a GSE will methodologies, and conducting analysis of the multifamily market. That fail one or more of the housing goals, sensitivity analysis.’’ appendix contains a detailed discussion notice be provided to the GSE and an While HUD recognizes the of the size of the multifamily mortgage opportunity provided for the GSE to shortcomings of the various data and the market that considers a number of explain the reason for the failure, or inability to derive precise point alternative data sources providing potential failure, and to provide estimates of various market parameters, ample evidence on multifamily information as to the feasibility of HUD does not believe that these origination volume over the years 1990 achieving the housing goal. The limitations call for expanding the range to 1999. HUD finds that newly Department then makes a of the market estimates, as suggested by mortgaged multifamily units represent determination, taking into consideration the GSEs. One purpose of the an average of 16–17 percent of units market and economic conditions and appendices is to demonstrate that financed during the 1990s. HUD’s the financial condition of the GSE, as to careful consideration of independent estimated multifamily market shares whether the goal was feasible. If the goal data sources can lead to reliable ranges exceed estimates prepared by PWC is determined not to be feasible, no of estimates for the goals-qualifying (averaging 8.7 percent for 1991–1998); further action is taken. If the goal is shares of the mortgage market. HUD Appendix D outlines what HUD regards determined to be feasible, the GSE is demonstrates the robustness of its as errors in the PWC study that led to given the opportunity to submit, for market estimates by reporting the results its unrealistically low estimates of the HUD’s approval, a housing plan of numerous sensitivity analyses that multifamily origination market. The demonstrating how the goal will be examine a range of assumptions about three multifamily market shares—13.5 achieved in the future. Thus, there are the existing data on the rental and percent, 15 percent, and 16.5 percent— adequate protections for the GSEs if owner markets. It should also be that HUD emphasizes in its market they are unable to achieve one or more emphasized that while there are some share model accommodates the of their housing goals due to a dramatic problems with existing mortgage market possibility of a recession or heavy downturn in the market. data, there is a wealth of information on refinance year. d. Shortcomings of Mortgage Market important components of the market. f. GSEs’ Affordable Lending Data Bases. Major mortgage market data For example, HMDA data provide wide Performance—Defining the Relevant bases such as HMDA and the American coverage of the single family owner Market. As noted earlier, HUD uses Housing Survey (AHS) are used to market in metropolitan areas, yielding HMDA data to show that even though implement HUD’s market share model. important information on the borrower the GSEs have improved their The GSEs made extensive criticisms of income and census tract (underserved performance since 1993, they have these data bases, concluding from their area) characteristics of that market, and lagged depositories and others in the critiques that the ranges for the thus providing useful information on conventional, conforming market in estimates of the goals-qualifying market the affordability characteristics of the funding affordable loans, both since shares should be wider to reflect single family rental and multifamily 1993 and particularly during the more uncertainty due to inadequate data. housing stock. recent 1996–98 period when the new Examples of problems asserted by the HUD’s specific responses to the GSEs’ housing goals were in effect. In their GSEs include: overstating of low-income comments on data are included mainly analyses, the GSEs reach the opposite loans in HMDA data; inability of HMDA in Section A of Appendices A, B and C conclusion—each concludes that they data to identify important segments of and Section B of Appendix D. For already match or even lead the market, the market (such as subprime lenders); example, as noted there, HUD disagrees depending on the affordable category underreporting of multifamily with the GSEs’ assertions regarding the being considered. The GSEs obtain this mortgages in HMDA data and generally seriousness of the bias problem (i.e., result by adjusting HMDA market data unreliable reporting of rental mortgages overstating low-income loans) in HMDA to exclude single family loans that they in other data bases; underreporting of data. HUD does not rely heavily on perceive as not being available for them income in the AHS; and the fact that some of the data bases that the GSEs to purchase. some important mortgage market data criticize (e.g., the borrower income data Both GSEs provided numerous bases such as the 1991 Residential from the AHS and the 1991 Residential comments concerning the types of Mortgage Finance Survey are dated. Finance Survey). mortgages that HUD should exclude HUD agrees that a single e. Size of the Multifamily Market. from the definition of the single family comprehensive source of information on Because a high proportion of owner market. Fannie Mae states that it mortgage markets is not available. multifamily units qualify for the ‘‘can only purchase or securitize Nevertheless, HUD considered and housing goals (e.g., 90 percent typically mortgages that primary market lenders analyzed a number of data sources for qualify for the Low- and Moderate- are willing to sell’’ and that ‘‘HUD fails the purpose of estimating market size, Income Housing Goal and about 50 to adjust for those housing markets that since no single source could provide all percent for the Special Affordable Goal), are not fully available to Fannie Mae
VerDate 112000 18:02 Oct 30, 2000 Jkt 194001 PO 00000 Frm 00018 Fmt 4701 Sfmt 4700 E:\FR\FM\31OCR2.SGM pfrm08 PsN: 31OCR2 Federal Register / Vol. 65, No. 211 / Tuesday, October 31, 2000 / Rules and Regulations 65061 and Freddie Mac.’’ Freddie Mac states GSEs to enter than others, the data higher ‘‘transitional’’ goals for 2000 as that it ‘‘has not achieved, and is reported in Figure 2 of this Appendix were proposed late in the year, and unlikely to achieve in the near term, the show that the GSEs have ample require that the GSEs perform at the same penetration in the subprime and opportunities to purchase goals- new goal levels, given the publication manufactured housing segments of the qualifying mortgages. Furthermore, date of this final rule, HUD will not market as it has achieved in the HUD recognizes the challenge of require that the GSEs meet higher goals conventional, conforming market’’ and, reaching segments of these markets by for 2000. therefore, HUD should not include these not setting each goal at the very top of At the same time, HUD has segments in its market definition. its market estimate range. determined that establishing 2001 as a According to the GSEs, markets that are Finally, it should also be noted that transition year is unnecessary and ‘‘not available’’ to them or where they the GSEs’ purchases under the housing unwarranted. The goal levels for the are not a ‘‘full participant’’ should be goals are not limited to new mortgages years 2001–2003, and 2000, were excluded from HUD’s market definition. that are originated in the current announced in July 1999 and formally In addition to the subprime and calendar year. The GSEs can purchase proposed earlier this year, providing the manufactured housing markets, loans from the substantial, existing GSEs ample notice of the goal levels examples of market segments mentioned stock of affordable loans—after these expected for these years. Indeed, data by the GSEs for exclusion consisted of loans have seasoned and the GSEs have indicate that the GSEs have increased the following: low-down payment had the opportunity to observe their their efforts in 2000 in light of the mortgages (those with loan-to-value payment performance. proposed 2001–2003 levels. Moreover, ratios greater than 80 percent) without g. HUD’s Determination. HUD the Department’s analysis of the private mortgage insurance or some carefully examined the comments on its statutory factors supports establishment other credit enhancement; loans analysis of the statutory factors used to of the goals for 2001–2003 at the levels financed through state and local determine the appropriate level of the proposed as both reasonable and housing finance agencies; below-market- housing goals, particularly the feasible. Accordingly, the housing goals interest-rate mortgages; specialized CRA methodology used to establish the for 2000 shall remain at the levels mortgages; and portions of depository market share for each of the goals. Based previously established in accordance portfolios that are not available for on that evaluation, as well as HUD’s with §§ 81.12(c)(3), 81.13(c)(3), and purchase by the GSEs at the time of additional analysis of its estimates, HUD 81.14(c)(3) of the regulations as they mortgage origination. determined that its basic methodology is existed prior to the effectiveness of this HUD disagrees with the comments a reasonable and valid approach to final rule. The housing goals for 2001– offered by the GSEs advocating estimating market share and that the 2003 are established at the levels HUD exclusion of those market segments that percentage ranges for each of the three proposed. they have not yet been able to penetrate. market share estimates do not need to be The Department believes the new goal The conventional, conforming market adjusted from those provided in the levels established by this rule to be represents the appropriate benchmark proposed rule. While a number of appropriate based upon consideration of for evaluating GSE performance as technical changes have been made in the statutory factors and comments discussed previously, even if this is not this final rule in response to the received. Setting the goal levels for the market that the GSEs perceive as comments, the approach for years 2001–2003 provides the GSEs available for them to purchase. determining market size has not been with a level of predictability to enable However, with respect to the subprime modified substantially. The detailed them to develop and implement market, HUD believes that the risky, evaluations show that the methodology, business strategies to achieve the goals. B&C portion of that market should be as modified, produces conservative 6. Low- and Moderate-Income Housing excluded from the market estimates for estimates of the market share for each Goal, § 81.12 each of the housing goals. Thus, HUD goal. HUD recognizes the uncertainty includes only the A-minus portion of regarding some of these estimates, This section discusses the the subprime market in its overall which has led the Department to Department’s consideration of the estimates of the goals-qualifying market undertake a number of sensitivity and statutory factors in arriving at and the shares. other analyses to reduce this uncertainty comments received on the new housing Excluding other important segments and also to provide a range of market goal level for the Low- and Moderate- of the mortgage market as the GSEs estimates (rather than precise point Income Housing Goal, which targets recommend would render the resulting estimates) for each of the housing goals. mortgages on housing for families with market benchmark useless for incomes at or below the area median evaluating the GSEs’ performance. The 5. Period Covered by the Housing Goals income. After consideration of these loans that the GSEs would exclude are This final rule establishes housing factors, this final rule establishes the important sources of goals credit and, in goals for the years 2001 through 2003. goal for the percentage of dwelling units fact, are the very loans the GSEs are The proposed rule would have to be financed by each GSE’s mortgage supposed to be reaching out to finance. established housing goals for the GSEs purchases for each of the years 2001– A recent report by the Department of for the year 2000 as well as 2001–2003, 2003 that are affordable to low- and Treasury demonstrated the targeting of with higher housing goals than moderate-income families at 50 percent. CRA-type loans to lower-income and currently required for 2000, a transition A short discussion of the statutory minority families. Numerous studies year, and still higher goals for 2001– factors received follows. Additional have shown that the manufactured 2003. information analyzing each of the home sector is an important source of The GSEs commented that since the statutory factors is provided in low-income housing. In many of these proposed rule would have set Appendix A, ‘‘Departmental markets, a more active secondary market transitional goals for 2000, if the goals Considerations to Establish the Low- could encourage lending to traditionally are established later in 2000, then 2001 and Moderate-Income Housing Goal,’’ underserved borrowers. While HUD should become the transition year. and Appendix D, ‘‘Estimating the Size recognizes that some segments of the HUD has considered the issue and of the Conventional Conforming Market market may be more challenging for the concluded that while it could establish for each Housing Goal.’’
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a. Market Estimate for the Low- and volume of refinance loans that Fannie percentage points in 1997, 2.1 Moderate-Income Housing Goal. The Mae funded in 1998, before rising to percentage points in 1998, and 3.9 Department estimates that dwelling 45.9 percent in 1999. percentage points in 1999. Freddie Mac units serving low- and moderate-income During the same period, Freddie Mac surpassed the goals by 1.1 percentage families will account for 50–55 percent demonstrated more consistent gains in points, 0.6 percentage points, 0.9 of total units financed in the overall performance under the Low- and percentage points and 4.1 percentage conventional, conforming mortgage Moderate-Income Housing Goal, from points in 1996, 1997, 1998 and 1999, market during the period 2001 through 29.7 percent in 1993 to 37.4 percent in respectively. 2003. HUD has developed a reasonable 1994 and 38.9 percent in 1995. Freddie Fannie Mae’s performance on the range, rather than a point estimate, that Mac then achieved 41.1 percent in 1996, Low- and Moderate-Income Housing accounts for significantly more adverse and 42.6 percent and 42.9 percent in Goal has surpassed Freddie Mac’s in economic conditions than have existed 1997 and 1998, respectively. In 1999, every year but one, 1999, when Freddie recently. Freddie Mac’s performance increased Mac slightly outperformed Fannie Mae b. Past Performance of the GSEs sharply to 46.1 percent. (46.1 percent versus 45.9 percent). under the Low- and Moderate-Income The housing goals that have been in However, Freddie Mac’s 1999 Housing Goal. During the transition effect prior to this final rule specified performance represented a 55 percent period from 1993 through 1995, Fannie that in 1996 at least 40 percent of the increase over its 1993 level, exceeding Mae’s performance under the Low- and number of units financed by mortgage the 34 percent increase by Fannie Mae Moderate-Income Housing Goal jumped purchases of the GSEs and eligible to over the same period, recognizing, sharply in one year, from 34.2 percent count toward the Low- and Moderate- however, that Fannie Mae’s 1993 in 1993 to 44.8 percent in 1994, before Income Goal should qualify as low- and performance was significantly greater declining to 42.3 percent in 1995. It moderate-income, and at least 42 than Freddie Mac’s. then stabilized at just over 45 percent in percent should qualify as such in each The GSEs’ performance under the 1996 and 1997. Fannie Mae’s year from 1997 through 1999. Fannie Low- and Moderate-Income Housing performance in 1998 declined to 44.1 Mae surpassed these goal levels by 5.6 Goal for the 1996 through 1999 period percent due in large measure to the high percentage points in 1996, 3.7 is summarized below:
SUMMARY OF GSES' PERFORMANCE UNDER THE LOW- AND MODERATE-INCOME HOUSING GOAL 1996±1999 32 [In percentages]
1996 1997 1998 1999
Required Goal Level ...... 40 42 42 42 Fannie Mae: Percent Low- and Moderate-Income ...... 45.6 45.7 44.1 45.9 Freddie Mac: Percent Low- and Moderate-Income ...... 41.1 42.6 42.9 46.1
Freddie Mac’s improved performance c. Summary of Comments. A number performance. Based on this ongoing since 1993 is due mainly to its increased of commenters recommended that the review, HUD may at a future date purchases of multifamily loans as it has Low- and Moderate-Income Housing consider separate single family and again become active in this market. Goal include separate goals targeting a multifamily goals or subgoals under the Some housing industry observers portion of the GSEs’ business to Low- and Moderate-Income Housing believe that the establishment of the multifamily housing and a portion to Goal, as warranted. Low- and Moderate-Income Housing single family housing. While there are Fannie Mae expressed no objection to Goal has been an important factor in distinctly different issues relevant to the the higher goal level, provided the explaining Freddie Mac’s re-entry into single family market and the Department retains the proposed the multifamily market. In fact, as multifamily market, the Department housing goals framework, including the indicated above, multifamily mortgage does not believe that it is necessary or proposed changes to the counting rules, purchases represent a significant appropriate to establish separate goals in the final rule. Freddie Mac supports component of both GSEs’ activities in for those two markets. First, the the goal framework included in the meeting the Low- and Moderate-Income increased level of the Low- and proposed rule and is committed to Housing Goal, even though multifamily Moderate-Income Housing Goal in this meeting the new goal levels. The loans comprise a relatively small final rule will require an increase in Department’s response to the issues portion of the GSEs’ business activities. both single family and multifamily raised by Fannie Mae and Freddie Mac In 1999, while Fannie Mae’s mortgage purchases. HUD’s present relative to HUD’s market share multifamily purchases represented only analysis of these markets indicates that methodologies and its analysis of the nine percent of its total mortgage a unitary goal will best achieve statutory factors are discussed above. acquisition volume measured in terms increased performance in both markets. Overall, other commenters were of dwelling units, these purchases Second, this final rule adopts a number supportive of the proposed increase in comprised 20 percent of units qualifying of incentives to encourage the GSEs to the Low- and Moderate-Income Housing for the Low- and Moderate-Income move into markets with unmet needs Goal. One group of commenters thought Housing Goal. Multifamily purchases including the financing of smaller that, since the GSEs are mandated to were eight percent of the units financed multifamily properties. HUD will, lead the market, the level of the Low- by Freddie Mac’s 1999 mortgage however, continue to examine market and Moderate-Income Housing Goal purchases but represented 17 percent of needs and evaluate the effects of the should be increased further. Another the units comprising Freddie Mac’s low- goal structure established in this final group of commenters supported the and moderate-income mortgage rule on the GSEs’ single family and increased level of the goal, but felt the purchases. multifamily mortgage purchase Department needed to be prepared to
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A short established in this final rule is The Geographically Targeted Goal discussion of the statutory factors reasonable and appropriate having focuses on areas currently underserved follows. Additional information considered the factors set forth in by the mortgage finance system. The analyzing each of the statutory factors is FHEFSSA. HUD set the level of the 1995 Final Rule provided that mortgage provided in Appendix B, ‘‘Departmental housing goal conservatively, relative to purchases count toward the Considerations to Establish the Central the Department’s market share Geographically Targeted Goal if such Cities, Rural Areas, and Other estimates, in order to accommodate a purchases finance properties that are Underserved Areas Goal,’’ and variety of economic scenarios. located in underserved census tracts. In Appendix D, ‘‘Estimating the Size of the Moreover, current examination of the § 81.2, HUD defined ‘‘underserved Conventional Conforming Market for gaps in the mortgage markets, along areas’’ for metropolitan areas (in central Each Housing Goal.’’ with the estimated size of the market cities and other underserved areas) as a. Market Estimate for the available to the GSEs, demonstrates that census tracts where either: (1) The tract Geographically Targeted Goal. The the number of mortgages secured by median income is at or below 90 percent Department estimates that dwelling housing for low- and moderate-income of the area median income (AMI); or (2) units in underserved areas will account families is more than sufficient for the the minority population is at least 30 for 29–32 percent of total units financed GSEs to achieve the new goal. percent and the tract median income is in the overall conventional, conforming Therefore, having considered all the at or below 120 percent of AMI. The mortgage market during the period 2001 statutory factors including housing AMI ratio is calculated by dividing the through 2003. HUD has developed a needs, projected economic and tract median income by the MSA reasonable range, rather than a point demographic conditions for 2001 to median income. The minority percent of estimate, that accounts for significantly 2003, the GSEs’ past performance, the a tract’s population is calculated by more adverse economic conditions than size of the market serving low- and dividing the tract’s minority population have existed recently. moderate-income families, and the by its total population. b. Past Performance of the GSEs GSEs’ ability to lead the market while For properties in non-metropolitan under the Geographically Targeted maintaining a sound financial (rural) areas, mortgage purchases count Goal. The housing goals that have been condition; HUD has determined that the toward the Geographically Targeted in effect prior to this final rule required annual goal for mortgage purchases Goal where such purchases finance that in 1996 at least 21 percent of the qualifying under the Low- and properties that are located in units financed by the GSEs’ mortgage Moderate-Income Housing Goal will be underserved counties. These are defined purchases should count toward the 50 percent of eligible units financed in as counties where either: (1) The Geographically Targeted Goal, and at each of the years 2001, 2002 and 2003. median income in the county does not least 24 percent in 1997 through 1999. The new goal level will increase the exceed 95 percent of the greater of the Fannie Mae surpassed the goal by 7.1 GSEs’ current level of performance to a state or nationwide non-metropolitan percentage points in 1996, 4.8 level that is consistent with reasonable median income; or (2) minorities percentage points in 1997, 3.0 estimates of the low- and moderate- comprise at least 30 percent of the percentage points in 1998, and 2.8 income housing market. residents and the median income in the percentage points in 1999. Freddie Mac county does not exceed 120 percent of surpassed the goal by 4.0, 2.3, 2.1 and 7. Central Cities, Rural Areas, and Other the state non-metropolitan median 3.5 percentage points in 1996, 1997, Underserved Areas Goal, § 81.13 income. 1998, and 1999, respectively. The GSEs’ This section discusses the After analyzing the statutory factors performance for the 1996–99 period is Department’s consideration of the and considering the comments, this summarized below:
SUMMARY OF GSE PERFORMANCE UNDER THE GEOGRAPHICALLY TARGETED GOAL 1996±1999 33 [In percentages]
1996 1997 1998 1999
Required Goal Level ...... 21 24 24 24 Fannie Mae: Percent Geographically Targeted ...... 28.1 28.8 27.0 26.8 Freddie Mac: Percent Geographically Targeted ...... 25.0 26.3 26.1 27.5
Although both GSEs have improved purchase mortgages, compared with 1998, Freddie Mac had not made their performance in underserved areas, 22.9 percent of Fannie Mae’s purchases, progress in reducing the gap between its on average, their mortgage purchases 25.8 percent of mortgages retained by performance and that of the overall continue to lag the primary market in portfolio lenders, and 24.9 percent of all market. In 1992, underserved areas providing financing for housing in these home purchase mortgages originated in accounted for 18.6 percent of Freddie areas. On average, during the 1996–1998 the conventional, conforming market. Mac’s purchases of home purchase period, mortgage purchases on These figures indicate that Freddie Mac mortgages and for 22.2 percent of such properties in underserved areas has been less likely than Fannie Mae to mortgage loans originated in the accounted for 19.9 percent of Freddie purchase mortgages on properties in conforming market, which yields a Mac’s purchases of single family home underserved neighborhoods. Through ‘‘Freddie Mac-to-Market’’ ratio 34 of
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0.84. By 1998, the ‘‘Freddie Mac-to- goal, but felt the Department needed to in low-income areas for each of the Market’’ ratio had actually fallen to 0.81. be prepared to accommodate changes in years 2001–2003 at 20 percent. A short During the same period, the ‘‘Fannie economic circumstances that may have discussion of the statutory factors Mae-to-Market’’ ratio increased from a negative impact on the GSEs’ ability follows. Additional information 0.82 to 0.93. However, in 1999, Freddie to meet the housing goals. analyzing each of the statutory factors is Mac’s purchase share for underserved d. HUD’s Determination. The provided in Appendix C, ‘‘Departmental area loans increased while Fannie Mae’s Geographically Targeted Goal Considerations to Establish the Special declined. In 1999, underserved areas established in this final rule is Affordable Housing Goal,’’ and accounted for 21.2 percent of Freddie reasonable and appropriate, considering Appendix D, ‘‘Estimating the Size of the Mac’s home purchase mortgage loan the factors set forth in FHEFSSA. The Conventional Conforming Market for acquisitions, compared with 20.6 Department’s market share estimates for Each Housing Goal. percent for Fannie Mae.35 the Geographically Targeted Goal a. Market Estimate for the Special In evaluating the GSEs’ past accommodate a variety of economic Affordable Housing Goal. The performance, it should be noted that scenarios. In addition, a current Department estimates that dwelling while borrowers in underserved examination of the gaps in the mortgage units serving very low-income families metropolitan areas tend to have much markets, along with the estimated size and low-income families living in low- lower incomes than borrowers in other of the market available to the GSEs, income areas will account for 23–26 areas, this does not mean that GSE demonstrates the opportunities for the percent of total units financed in the performance in underserved areas must GSEs to purchase mortgages secured by overall conventional, conforming be derived from mortgages on housing housing in underserved areas of the mortgage market during the period 2001 for lower income families. In 1999, nation. through 2003. HUD has developed a Therefore, having considered all housing for above median-income reasonable range, rather than a point statutory factors including housing households accounted for about half of estimate, that accounts for significantly needs, projected economic and the single family owner-occupied more adverse economic conditions than demographic conditions for 2001 to mortgages the GSEs purchased in have existed recently. underserved areas. 2003, the GSEs’ past performance, the c. Summary of Comments. Fannie size of the market for central cities, rural b. Past Performance of the GSEs Mae expressed no objection to the areas and other underserved areas, and under the Special Affordable Housing higher goal level provided the the GSEs’ ability to lead the market Goal. The Special Affordable Housing Department retains the proposed while maintaining a sound financial Goal is designed to ensure that the GSEs housing goals framework, including the condition; HUD is establishing the serve the very low- and low-income proposed changes to the counting rules, annual goal for mortgage purchases portion of the housing market. However, in the final rule. Freddie Mac supported qualifying under the Geographically analysis of HMDA data shows that the the overall goal framework included in Targeted Goal to be 31 percent of shares of mortgage loans for very low- the proposed rule but recommended eligible units financed in each of the income homebuyers are smaller for the that the Geographically Targeted Goal years 2001, 2002 and 2003. The new GSEs’ mortgage purchases than for be set at 30 percent. Freddie Mac noted goal level will increase the GSEs’ depository institutions and others that it was committed to stretching to current level of performance to a level originating mortgage loans in the meet the proposed new goal levels, but that is consistent with reasonable conforming conventional market. HUD’s believed that the level of the estimates of the housing market in analysis suggests that the GSEs should Geographically Targeted Goal was set underserved areas. improve their performance in providing too far toward the high end of the financing for the very low-income market estimate, making it more 8. Special Affordable Housing Goal, housing market. difficult to achieve. The Department’s § 81.14 The housing goals that have been in response to the issues raised by both This section discusses the effect prior to this final rule specified Fannie Mae and Freddie Mac relative to Department’s consideration of the that in 1996 at least 12 percent of the HUD’s estimates of the markets and its statutory factors in arriving at, and the number of units eligible to count toward analysis of the statutory factors used to comments received on, the new housing the Special Affordable Housing Goal set the level of the goals was discussed goal level for the Special Affordable should qualify as special affordable, and above. Housing Goal, which counts mortgages at least 14 percent in 1997 through Overall, other commenters were on housing for very low-income families 1999. As indicated below, Fannie Mae supportive of the proposed increase in and low-income families living in low- surpassed the goal by 3.4 percentage the Geographically Targeted Goal. income areas. After consideration of points in 1996, 3.0 percentage points in Certain commenters noted that by these factors and the comments 1997, 0.3 percentage points in 1998 and placing the level of the goal around the received, this final rule establishes the 3.6 percentage points in 1999. Freddie midpoint of the estimate of market size, goal for the percentage of the total Mac surpassed the goal by 2.0, 1.2, 1.9, the GSEs will be encouraged to move number of dwelling units financed by and 3.2 percentage points in 1996, 1997, into a market leadership position. each GSE’s mortgage purchases for 1998, and 1999, respectively. The GSEs’ Another group of commenters housing affordable to very low-income performance for the 1996–99 period is supported the increased level of the families and low-income families living summarized below:
SUMMARY OF GSE PERFORMANCE UNDER THE SPECIAL AFFORDABLE HOUSING GOAL 1996±1999 36
1996 1997 1998 1999 (in percent) (in percent) (in percent) (in percent)
Required Goal Level ...... 12 14 14 14 Fannie Mae: Percent Low-and Moderate-Income ...... 15.4 17.0 14.3 17.6 Freddie Mac:
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SUMMARY OF GSE PERFORMANCE UNDER THE SPECIAL AFFORDABLE HOUSING GOAL 1996±1999 36ÐContinued
1996 1997 1998 1999 (in percent) (in percent) (in percent) (in percent)
Percent Low-and Moderate-Income ...... 14.0 15.2 15.9 17.2
As noted above, HMDA and GSE data the goal framework included in the with reasonable estimates of the special for metropolitan areas show that both proposed rule and is committed to affordable housing market. GSEs lag depository institutions and stretching to meet the new goal levels. e. Special Affordable Housing Goal: other lenders in providing financing for The Department’s response to the issues Multifamily Subgoal. This final rule home loans that qualify for the Special raised by both Fannie Mae and Freddie modifies the proposed rule by Affordable Housing Goal. Special Mac relative to HUD’s market share implementing a multifamily subgoal affordable loans, which include loans methodologies and its analysis of the based upon each GSE’s respective for very low-income borrowers and low- statutory factors used to set the level of average mortgage purchase volume for income borrowers living in low-income the goals was discussed above. the years 1997 through 1999. The areas, accounted for 9.8 percent of Overall, other commenters were proposed rule suggested that the subgoal Freddie Mac’s purchases of home supportive of the proposed increase in be established at 0.9 percent of each purchase mortgages during 1996–98, the Special Affordable Housing Goal. GSE’s dollar volume of combined 1998 11.9 percent of Fannie Mae’s purchases, One group of commenters thought that, mortgage purchases in 2000 and at 1.0 16.7 percent of newly originated loans since the GSEs are mandated to lead the percent of combined 1998 mortgage retained by depository institutions, and market, the level of the Special purchases from 2001 through 2003. In 15.3 percent of all new originations in Affordable Housing Goal should be this final rule, the level of the subgoal the conventional, conforming market. increased even more, at a minimum, to is established at a fixed level of one While Freddie Mac has improved its the lower range of the Department’s percent of the average of each GSE’s special affordable lending since the market share, at 23–24 percent. Another respective dollar volume of combined housing goals were put in place in 1993, group of commenters supported the (single family and multifamily) up until 1999 it had not made as much increased level of the goal but felt the mortgage purchases in the years 1997, progress as Fannie Mae in closing the Department needed to be prepared to 1998 and 1999. This level is $2.85 gap with depository institutions and accommodate changes in economic billion for Fannie Mae and $2.11 billion other lenders in the home loan market. circumstances that may have a negative for Freddie Mac, in each of the years In 1998, Freddie Mac’s special impact on the GSEs’ ability to meet the 2001 through 2003. f. Summary of Comments. Both affordable performance was 73 percent housing goals. of the primary market proportion of Fannie Mae and Freddie Mac opposed d. HUD Determination. The Special home loans that would qualify under establishing the special affordable Affordable Housing Goal established in the Special Affordable Housing Goal, multifamily subgoal as a percentage of the final rule is reasonable and compared to Fannie Mae’s performance their 1998 transaction volumes, stating of 85 percent during the same period. In appropriate, considering the factors set that 1998 was in some respects an 1999, Freddie Mac did match Fannie forth in FHEFSSA. The market share unusual year in the mortgage markets. Mae, as special affordable loans estimates for this goal reflect a variety Instead, they both recommended that accounted for 12.5 percent of its home of economic scenarios significantly the special affordable multifamily loan purchases versus 12.3 percent of more adverse than have existed subgoal be established as a percentage of Fannie Mae’s home loan purchases. recently. Current examination of the a five year average of each GSE’s Market data for 1999 are not yet gaps in the mortgage markets, along transactions volume. Freddie Mac available. with the estimated size of the market commented further that HUD’s The multifamily market is especially available to the GSEs, demonstrates that proposed subgoal was unreasonably important in the establishment of the the number of mortgages secured by high. Special Affordable Housing Goal for housing for special affordable families is Many other commenters supported Fannie Mae and Freddie Mac because of more than sufficient for the GSEs to the multifamily subgoal, although they the relatively high percentage of achieve the goal. questioned whether 1998 was the multifamily units meeting the Special Having considered all statutory appropriate base year upon which to Affordable Housing Goal. For example, factors including housing needs, establish the subgoal. Some commenters in 1999, 56 percent of units financed by projected economic and demographic asserted that the proposed subgoal was Fannie Mae’s multifamily mortgage conditions for 2001 to 2003, the GSEs’ too high, in light of an expected decline purchases met the Special Affordable past performance, the size of the market in multifamily origination volume. Housing Goal, representing 31 percent serving very low-income families and Other commenters noted that the of units counted toward the Special low-income families living in low- subgoal was too low, based on the needs Affordable Housing Goal, at a time income areas, and the GSEs’ ability to of very low- and low-income families when multifamily units represented lead the market while maintaining a and those in rural areas. Yet, others only nine percent of its total purchase sound financial condition; HUD is agreed the subgoal should continue to volume.37 establishing the annual goal for be percentage based, but argued that the c. Summary of Comments. Fannie mortgage purchases qualifying under baseline year should move from year to Mae expressed no objection to the the Special Affordable Housing Goal at year. Still other commenters felt that the higher goal level, provided the 20 percent of eligible units financed by multifamily subgoal should be Department retains the proposed each GSE in each of the years 2001, eliminated, as it no longer appears to housing goals framework, including the 2002 and 2003. This new goal level will serve a purpose, particularly since proposed changes to the counting rules, increase the GSEs’ current level of Freddie Mac has re-entered the in the final rule. Freddie Mac supported performance to a level that is consistent multifamily market.
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g. HUD’s Determination. Both the three alternative approaches for b. Summary of Comments. Fannie multifamily mortgage market and specifying multifamily subgoals for the Mae and Freddie Mac commented in Freddie Mac’s multifamily transactions GSEs based on a (i) minimum number detail on the use of bonus points and volume have grown significantly during of units; (ii) minimum percentage of subgoals. Fannie Mae supported the use the 1990’s, indicating both increased multifamily acquisition volume; and of bonus points to provide incentives to opportunity and capacity to grow by (iii) minimum number of mortgages expand its presence in the markets for Freddie Mac. While Freddie Mac acquired. While some of these proposals both the small multifamily and single continues to lag behind Fannie Mae did receive support from commenters, family owner-occupied, 2–4 unit somewhat in its multifamily volume, it HUD does not see any compelling property. Fannie Mae opposed the use appears to be within reach of catching reason to alter the dollar based structure of subgoals for that purpose, however, up with its larger competitor with of the multifamily subgoal as arguing that they would result in regard to the multifamily proportion of established in the regulations, which micromanagement of its business total purchases. In 1999, Fannie Mae’s can be updated and adapted to the operation. Fannie Mae added that multifamily mortgage purchases were current market environment by basing it ‘‘these two property types pose great 9.5 percent of its total mortgage upon recent acquisition volume. It is difficulties for the secondary market to purchases and Freddie Mac’s noteworthy that the Special Affordable serve and will require new channels, multifamily mortgage purchases were Housing Goal, as a percentage of new products, new modes of operation, 8.3 percent of its total mortgage business goal based on the number of and significant investments to better purchases. units financed, combines elements of understand the risks.’’ Fannie Mae also Freddie Mac’s multifamily special options (i) and (iii). HUD’s decision to recommended that if the Department affordable transactions volume was $2.7 award bonus points toward the housing adopts bonus points, the points should billion in 1998 and $2.3 billion in 1999, goals for GSE transactions involving continue beyond 2003. which demonstrates Freddie Mac’s small multifamily properties with 5–50 Freddie Mac supported using bonus capacity to generate significant units will achieve some of the intended points and opposed using subgoals for multifamily special affordable volume policy objectives associated with option small multifamily and single family in a favorable market environment. (iii). owner-occupied, 2–4 unit property However, the Department is mindful of mortgage acquisitions. As with Fannie the fact that the multifamily market 9. Bonuses and Subgoals Mae, Freddie Mac commented that conditions experienced during 1998 a. Overview. The Department subgoals would result in were very favorable and may not be proposed to introduce a system of bonus micromanagement of its business. fully representative of future years. HUD points to encourage the GSEs to increase Freddie Mac also recommended expects conventional multifamily their activity in specified underserved calculating the threshold for 2–4 unit volume in 2001 through 2003 to be markets that serve low- and moderate- properties based on the period from somewhat lower than the level reached income families and families in 1995–1999 instead of using a five-year during 1998. underserved areas. Bonus points were rolling average. Overall, Freddie Mac The Special Affordable Housing specifically proposed to encourage commented that it would prefer bonus Multifamily Subgoal established in this increased involvement by the GSEs points to subgoals for any targeted final rule is reasonable and appropriate under goals established for the years market segments. based on the Department’s analysis of 2000–2003 for purchases of mortgages Other commenters were generally this market. The Department’s decision financing small multifamily properties supportive of the use of bonus points, to retain the multifamily subgoal is (5–50 units) and two to four unit owner- with many noting that bonus points based on the fact that HUD’s analysis occupied properties that contain rental were preferable to additional subgoals. indicates that multifamily housing still units. The areas for which bonus points This group of commenters felt that serves the housing needs of lower- were suggested are areas in which the additional subgoals would result in income families and families in low- GSEs’ mortgage purchases have micromanagement of the GSEs’ business income areas to a greater extent than traditionally played a minor role but operations but felt that bonus points single family housing. By retaining the which provide significant sources of provided an incentive rather than a multifamily subgoal, the Department affordable housing and for which the mandate to move into markets that were ensures that the GSEs continue their need for mortgage credit persists. As a underserved. activity in this market and that they regulatory incentive to encourage the One group of commenters was achieve, at least, a minimum level of GSEs to increase their mortgage opposed to bonus points. Among many special affordable multifamily mortgage purchase activity in underserved of these commenters, however, there purchases that are affordable to lower- markets, the Department proposed the was support for incentives for the GSEs income families. Now that more recent use of bonus points for mortgage to purchase mortgages on small rental data is available, it is apparent that purchases in these important segments properties, noting that the market is taking 1999 mortgage volume into of the housing market. HUD also sought underserved and provides an excellent consideration, along with that of 1997 comments on the utility of applying source of affordable rental housing. and 1998, more accurately corresponds bonus points and other regulatory Specific comments regarding the use of to the relative size and respective incentives such as subgoals to other bonus points concluded that bonus capabilities of the GSEs over the 2001– underserved segments of the market points would: (a) Allow the GSEs to 2003 goals period. Accordingly, as including manufactured housing, meet the goals with less effort and that noted above, this final rule establishes multifamily properties in need of they might lead the GSEs to relax their each GSE’s special affordable rehabilitation, and properties in tribal single family efforts; and (b) inflate goal multifamily subgoal at the respective areas. performance numbers. It was suggested average of one percent of that GSEs’ This final rule incorporates the use of by several commenters that subgoals combined mortgage purchases over 1997 bonus points for small multifamily would be a more appropriate vehicle to through 1999. properties and owner-occupied single encourage the GSEs’ involvement in h. Multifamily Subgoal Alternatives. family rental properties as proposed for those segments of the market as well as In the proposed rule, HUD identified the years 2001 through 2003. other segments, e.g., mortgages made to
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Noting there is no need for HUD to award future housing needs, may establish that the difference in size and age bonus points as an incentive for the bonus points for other mortgage between Freddie Mac’s and Fannie GSEs to enter that market. purchases in the future. Mae’s multifamily portfolios makes goal c. HUD’s Determination. This final achievement easier for Fannie Mae, 10. Temporary Adjustment Factor for rule adopts the two categories for bonus Freddie Mac also recommended that the Freddie Mac points that were proposed by the temporary adjustment factor apply to all Department. Bonus points are a a. Overview. To overcome any three goals. Freddie Mac also opposed temporary incentive for the GSEs to step lingering effects of Freddie Mac’s any phasing out or elimination of the up their efforts to serve this particular decision to dismantle and then adjustment factor. need. Availability of bonus points for cautiously reestablish a multifamily Other comments on the proposal were this purpose beyond 2003, therefore, mortgage purchase program in the early mixed. While there were many will require a determination by the 1990s, the Department proposed an comments in support of the proposal, a Department that the bonus points incentive for Freddie Mac to further number of commenters objected to the continue to serve this need. HUD’s expand its scope of multifamily proposal, observing that by providing research and analysis indicates that operations through the use of a the temporary adjustment factor, HUD there is substantial unmet need in these temporary adjustment factor for its would be rewarding Freddie Mac for two areas and believes that these are multifamily mortgage purchases in leaving the multifamily mortgage market markets the GSEs should serve better. calculating its performance under the in previous years. Commenters also While HUD has determined to establish Low- and Moderate-Income Housing suggested that the same objective could bonus points in the two market areas Goal and the Special Affordable be achieved through the Special proposed, HUD does not believe that Housing Goal. In determining Freddie Affordable Multifamily Subgoal or by either the use of subgoals, that would be Mac’s performance for each of these two establishing separate housing goals for unenforceable under FHEFSSA (except goals, the Department proposed that the single family and multifamily for the Special Affordable Housing each unit in a property with more than market. Many of these commenters said Goal), or bonus points amounts to 50 units meeting either of these two that, if the temporary adjustment factor micromanagement of the GSEs. By housing goals would be counted as 1.2 were adopted for Freddie Mac, it should utilizing bonus points the GSEs can units in the numerator of the respective be phased out over a period of time. choose whether to increase their housing goal percentage. The temporary c. HUD’s Determination. In the period presence in these markets, and by adjustment factor would be limited to evaluating the impact of these since HUD’s interim housing goals took properties with more than 50 units to effect in January 1993, the volume of incentives on the GSEs’ mortgage avoid overlap with the proposal to purchase patterns, the Department can Freddie Mac’s multifamily mortgage award bonus points for multifamily purchase transactions has grown evaluate the reasonableness and properties with 5–50 units. Comments effectiveness of bonus points as a tool to significantly, both in absolute terms and were requested on whether the increase activity in specific markets. as a proportion of its total mortgage proposed temporary adjustment factor d. Additional Bonus Points and purchases. Freddie Mac’s 1993 Subgoals. Commenters suggested a wide for Freddie Mac was set at an multifamily transactions volume was variety of other areas to consider for appropriate level and whether such an only $191 million, compared with $7.6 either bonus points and/or subgoals adjustment factor should be phased out billion in 1999. In 1999, Freddie Mac’s including those for which views were prior to 2003. multifamily transactions volume invited. Suggestions by commenters for This final rule incorporates the represented 8.3 percent of units backing subgoals included home purchase temporary adjustment factor for Freddie its total mortgage purchases, close to the mortgages and mortgages to minority Mac for multifamily properties, other Fannie Mae proportion of 9.5 percent. borrowers. Commenters also suggested than those small multifamily units Thus, while Freddie Mac continues to either bonus points and/or subgoals for receiving bonus credit, as proposed for lag behind Fannie Mae somewhat in its reverse mortgages, groups with low the years 2001 through 2003. multifamily volume, it appears to be homeownership rates, rural multifamily b. Summary of Comments. Fannie within reach of catching up with Fannie housing programs, manufactured Mae and Freddie Mac commented in Mae with regard to the multifamily housing, and expiring Section 8 detail on the application of a temporary proportion of total purchases. assistance contracts, among other types adjustment factor for Freddie Mac’s In discussing the Department’s of transactions. While there was some multifamily business. Fannie Mae appropriations for fiscal year 2000, the support for directing bonus points for opposed the application of a temporary Conference Report stated in October, encouraging GSE financing for adjustment factor for Freddie Mac’s 1999 that ‘‘* * * the stretch affordable minorities there was, however, no multifamily business. Fannie Mae stated housing efforts required of each of consensus among the commenters for that Freddie Mac made a business Freddie Mac and Fannie Mae should be this or other specific categories that decision to leave the multifamily market equal, so that both enterprises are bonus points and subgoals should and HUD’s action would effectively similarly challenged in attaining the address. Since HUD believes that the punish Fannie Mae for staying in the goals. This will require the Secretary to increased goals under this rule will market. Fannie Mae recommended that recognize the present composition of result in increased financing of instead of a temporary adjustment each enterprise’s overall portfolio in affordable housing and increased home factor, HUD should lower Freddie Mac’s order to ensure regulatory parity in the ownership opportunities for minorities goals to levels that would represent a application of regulatory guidelines and other families in underserved areas, similar ‘‘stretch’’ as the higher goal measuring goal compliance.’’ 38
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Consistent with Congress’ October monitoring the GSEs’ activities in this penalties under the terms of a 1999 guidance, HUD’s analysis indicates area and on whether certain of these negotiated contract and where the that a 1.2 adjustment factor applied to data elements should be included in the lender adheres to the following criteria: Freddie Mac’s mortgage purchases for public use data base. The proposed rule A mortgage that has a prepayment multifamily properties of more than 50 noted that possible data elements that penalty should provide some benefit to units for purposes of the Low- and could be collected from the GSEs for the borrower (such as a rate or fee Moderate-Income and Special monitoring include loan level data on reduction for accepting the prepayment Affordable Housing Goals, as proposed, the annual percentage rate, debt-to- premium); the borrower also should be is sufficient both to overcome any income ratio, points and fees, and offered the choice of another mortgage lingering effects of Freddie Mac’s prepayment penalties. product that does not require payment decision to leave the multifamily market b. HUD/Treasury Report. On June 20, of such premium; the terms of the in the early 1990s and to ‘‘ensure 2000, HUD and the Department of mortgage provision that requires a regulatory parity,’’ taking account of the Treasury jointly released a report prepayment penalty should be recent magnitude of difference between entitled ‘‘Curbing Predatory Home adequately disclosed to the borrower, the GSEs’ respective multifamily shares Mortgage Lending,’’ which detailed and the prepayment penalty should not of business and the multifamily market predatory or abusive lending practices be charged when the mortgage debt is projections detailed in Appendix D. in connection with higher cost loans in accelerated as a result of the borrower’s Therefore, while the goals are set at the the subprime mortgage market. These default in making his or her mortgage same levels, the Department has practices include charging excessive payments. decided to implement the temporary fees, lending to borrowers without Fannie Mae also announced that it adjustment factor as proposed. The regard to their ability to repay, will not purchase loans from lenders temporary adjustment factor of 1.2 will establishing prepayment penalties that who steer borrowers to higher cost be applied to the Low- and Moderate- prevent high cost borrowers from products if those borrowers qualify for Income Housing Goal and the Special refinancing into lower cost loans, lower cost products. Freddie Mac Affordable Housing Goal. The abusive terms and conditions that announced that it will not purchase temporary adjustment factor will include packing loans with products HOEPA loans, nor will it purchase terminate December 31, 2003. The such as single premium credit mortgage loans with single-premium temporary adjustment factor will not insurance, and other practices, credit life insurance. Both GSEs have apply to Fannie Mae. including failing to steer borrowers to announced that they will require the lowest-cost product for which they lenders who sell them loans to file 11. High Cost Mortgages qualify and incomplete reporting of monthly full-file credit reports on every a. Overview. The proposed rule borrowers’ payment history to credit borrower. While the GSEs’ policies requested comments on whether HUD bureaus. The report recommended differ somewhat in their scope and should disallow goals credit for high legislative and regulatory action to specificity, both have publicly cost mortgage loans, and if so, whether combat predatory lending while expressed strong concern about HUD should define high cost mortgage maintaining access to credit for low- predatory lending practices and have loans using the Home Ownership and and moderate-income borrowers. adopted policies requiring them to look Equity Protection Act (HOEPA) 39 or an Respecting the secondary mortgage harder at particular loan terms and their alternative definition. HOEPA defines market, the report recommended that seller/servicers’ business practices, and high cost mortgages as those that meet HUD restrict the GSEs from funding restricting their purchases of loans an annual percentage rate (APR) loans with predatory features since such originated with such terms and threshold (more than 10 percentage loans may undermine homeownership practices. However, the GSEs’ broad points above the yield on Treasury by low- and moderate-income families. guidelines describing the characteristics securities of comparable maturity; the HUD and Treasury noted ‘‘while the of loans that they intend to make Federal Reserve Board can adjust the GSEs currently play a relatively small ineligible for purchase lack important threshold down to 8 percent or up to 12 role in the subprime market today, they details and are subject to changes in percent), or a threshold for points and are beginning to reach out with new corporate direction, or other changes. fees charged (exceeding the greater of 8 products in this marketplace.’’ Therefore, HUD and Treasury percent of the loan amount or $400— Recently the GSEs have each recognized in the report that such adjusted for inflation to $451 for the announced corporate policies against corporate policies may not be sufficient year 2000). HOEPA requires additional the purchase of loans with certain and that regulations would be needed to disclosures and restricts certain loan features. Fannie Mae has established address this issue. terms (e.g., prepayment penalties, greater limitations than Freddie Mac, c. Summary of Comments. Many balloon payments, and negative although Fannie Mae has been less commenters on the proposed rule amortization) and practices (e.g. failing involved in the subprime market to supported the disallowance of credit to consider a borrower’s ability to repay) date. Fannie Mae announced that ‘‘[f]or under the GSE housing goals for high for those mortgages.40 loans delivered to Fannie Mae, the cost mortgages. Some of these The proposed rule also requested points and fees charged to a borrower commenters commended the GSEs for comments on the potential benefits, if should not exceed 5 percent, except beginning to offer quality loan products any, associated with the GSEs’ presence where this would result in an to credit-impaired borrowers. Those in the various higher cost mortgage unprofitable origination,’’ and that commenters argued, however, that markets, such as the standardization of Fannie Mae will not purchase high cost restrictions on goals credit for certain underwriting guidelines or reductions mortgages as defined under HOEPA. loans would not prohibit the GSEs from in interest rates, as well as the potential Fannie Mae announced further that it purchasing all subprime loans but dangers, if any, associated with the ‘‘will not purchase or securitize any merely those that are likely to be GSEs’ presence in those markets. mortgage for which a prepaid single- predatory and wealth-stripping. Other Finally, the proposed rule requested premium credit life insurance policy commenters argued that without comments on what additional data was sold to the borrower,’’ and that it adequate controls, the GSEs’ forays into would be useful for the purposes of will generally only allow prepayment the subprime market will not translate
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Freddie Mac urged the GSEs should not receive credit under that the GSEs should be required to Department to await the outcome of any the housing goals for high cost provide full information on their Federal legislative or regulatory mortgages that are subject to HOEPA. subprime loans, including the APR, initiatives that may arise as a result of Many other commenters felt that such a total closing costs, points, and fees the widespread concern and focus on standard would not go far enough, and (including financed credit insurance these issues among members of that the GSEs should not receive goals premiums), delinquency and foreclosure Congress and regulatory agencies. credit for purchasing loans with certain rates, and the length of time between The GSEs also both objected to any features. Such features would include purchase and refinance on an aggregate additional reporting requirements fees greater than 3 percent of the loan basis. related to monitoring their purchases of amount, prepayment penalties on high Both GSEs and a large group of high cost mortgages. Fannie Mae argued cost loans, and prepaid single premium commenters objected to the that the relevant information is not now credit life insurance that is to be Department’s proposal regarding the captured in the primary market, and financed in the loan. Commenters also disallowance of goals credit for that collecting and reporting this provided additional features for which purchases of high cost mortgages. Many information would force a ‘‘tremendous the GSEs should not receive goals of those commenting in this regard change to the way the market operates.’’ credit, including negative amortization provided substantially similar responses Freddie Mac similarly argued that the and accelerating indebtedness, fees to to those submitted by Fannie Mae. required data elements are not stored renew or modify, balloon payments, These commenters emphasized the uniformly across lenders, and collecting yield spread premiums, mandatory difference between legitimate subprime and reporting such data elements would arbitration, or high cost loans for which lending and lending through the use of require ‘‘substantial investments,’’ the economic impacts of which would the borrower did not receive abusive and predatory practices such as likely be considerable. homeownership counseling. those outlined in the HUD/Treasury d. HUD’s Determination. After One commenter suggested that the report. Several of these commenters considering the issues raised by the Department should treat loans expressed concern that the Department commenters, the Department has purchased from an institution that should not take any action that would determined that, in accordance with the engages in predatory lending the same discourage the GSEs from serving the Secretary’s authority under section as loans that actually have predatory subprime market. The GSEs both 1336(a)(2) of FHEFSSA, the GSEs features in order to send a message that remarked that they are using enhanced should not be assigned credit toward the such lenders are not responsible technology (e.g., their respective Affordable Housing Goals for business partners and to restrict further automated underwriting systems) to purchasing certain high cost mortgages the availability of mortgage credit for allow them to offer products targeted including mortgages with certain such loans. Other commenters suggested toward borrowers with impaired credit, unacceptable features. The GSEs have a that the GSEs should not be allowed to and that they are, therefore, able to statutory responsibility to lead the purchase subprime loans at all, so that move into the legitimate subprime industry in making mortgage credit they will have an incentive to develop market in a responsible and prudent available to low and moderate income conventional mortgage products to manner, bringing liquidity, families and underserved areas. In reach out to those borrowers. Another standardization, and efficiency to that carrying out this responsibility, the suggestion was that the GSEs should be market. The GSEs argue that disallowing GSEs should seek to make the lowest affirmatively penalized for purchasing goals credit for high cost mortgages will cost credit available while ensuring that certain abusive mortgages (i.e., by provide a disincentive for them to reach they do not purchase loans that actually subtracting points from the numerator out to those borrowers and will do harm borrowers and support unfair but fully counting such loans in the nothing to combat the predatory lending lending practices. The HUD/Treasury denominator). practices about which the Department is report recommended regulatory and/or A number of commenters suggested concerned. Indeed, Fannie Mae argued legislative restrictions that would go that GSEs should be required to conduct that disallowing goals credit for high beyond the matter of goals credit and fair lending reviews of subprime loans cost mortgages would simply drive would prohibit the GSEs from before they purchase them in order to predatory lending ‘‘into the government purchasing certain types of loans with receive credit. Such reviews would market or to secondary market sources high costs and/or predatory features include determining whether the who are less responsible than Fannie altogether. These proposals stem from lending institution is reporting Mae on this issue.’’ the concern that mortgages with borrowers’ full payment histories to Fannie Mae argued that disallowing predatory features undermine credit bureaus. goals credit for high cost mortgages is homeownership by low-and moderate- Many of the commenters that inconsistent with the Department’s income families in derogation of the supported the disallowance of goals inclusion of A-minus mortgages in the GSEs’ Charter missions. As pointed out credit for high cost loans and loans with market estimates to which the in the HUD/Treasury Report, ‘‘While the certain harmful features asserted that Department compares the GSEs’ secondary market could be viewed as the GSEs’ support of such lending poses performance. Fannie Mae further argued part of the problem of abusive practices great risks. These commenters argued that the Department would need to in the subprime mortgage market, it may that the types of mortgage products that ‘‘recalibrate the goals’’ in order to also represent a large part of the strip equity out of homes and lead to implement a system of disallowing goals solution to the problem. If the secondary higher foreclosures are not consistent credit for high cost mortgages, which market refuses to purchase loans that with the GSEs’ public mission. Further, would be ‘‘extremely difficult, if not carry abusive terms, or loans originated to the extent that defaults on these loans impossible’’ due to ‘‘the lack of reliable by lenders engaging in abusive lead to losses, these commenters market data on loan costs.’’ practices, the primary market might
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As mentioned above, if the goals for purchases of high cost loans points and fees charged to a borrower Federal Reserve changes the HOEPA including mortgages with certain exceed 5 percent of the loan amount, thresholds, such changes will be unacceptable terms and resulting from except where this restriction would encompassed within HUD’s housing unacceptable practices. Specifically, the result in an unprofitable origination. For goals, unless HUD notifies the GSEs GSEs will not receive credit toward any such cases, involving small loans, this otherwise. of the Affordable Housing Goals for rule provides a maximum dollar amount (b) Prepayment penalties, except dwelling units financed by mortgages of $1000, or such other amount as may where: (i) the mortgage provides some that come within HOEPA’s thresholds be requested by a GSE and determined benefits to the borrower (e.g., such as for high cost mortgages, nor will they appropriate by the Secretary, as an rate or fee reduction for accepting the receive credit for mortgages with certain alternative to the 5 percent limit. For prepayment premium); (ii) the borrower unacceptable features or resulting from purposes of this provision, points and is offered the choice of a mortgage that unacceptable practices. The housing fees include: (i) Origination fees, (ii) does not contain such a penalty; (iii) the goals provide incentives to encourage underwriting fees, (iii) broker fees, (iv) terms of the mortgage provision GSE efforts to finance housing for low finder’s fees, and (v) charges that the containing the prepayment penalty are and moderate income families, housing lender imposes as a condition of making adequately disclosed to the borrower; in underserved areas, and special the loan—whether they are paid to the and (iv) the prepayment penalty is not affordable housing. Therefore, HUD has lender or a third party. For purposes of charged when the mortgage debt is determined that the GSEs should not this provision, points and fees would accelerated as the result of the receive the incentive of goals credit for not include: (i) Bona fide discount borrower’s default in making his or her purchasing high cost mortgages points; (ii) fees paid for actual services mortgage payments. including mortgages with unacceptable rendered in connection with the (c) Single premium credit life features. origination of the mortgage, such as insurance products sold in connection (1) Mortgages that Come Within attorneys’ fees, notary’s fees, and fees with the origination of the mortgage. HOEPA’s Thresholds. The final rule paid for property appraisals, credit (d) Evidence that the lender did not disallows goals credit for dwelling units reports, surveys, title examinations and adequately consider the borrower’s financed by mortgages that come within extracts, flood and tax certifications, ability to make payments, i.e., mortgages HOEPA’s thresholds, i.e., with an APR and home inspections; (iii) the cost of that are originated with underwriting of 10 percentage points or higher above mortgage insurance or credit-risk price techniques that focus on the borrower’s the yield on Treasury securities of adjustments; (iv) the costs of title, equity in the home, and do not give full comparable maturity, or with points and hazard, and flood insurance policies; (v) consideration to the borrower’s income fees that are above the greater of 8 state and local transfer taxes or fees; (vi) and other obligations. Ability to repay percent of the loan amount or $451. escrow deposits for the future payment must be based upon relating the HOEPA’s thresholds provide a of taxes and insurance premiums; and borrower’s income, assets, and liabilities discernible and standard industry (vii) other miscellaneous fees and to the mortgage payments. measure of a class of loans that are very charges that, in total, do not exceed 0.25 (3) Mortgages Contrary to Good high cost, that present a very high risk percent of the loan amount. Lending Practices. As the GSEs have that their borrowers will lose their This restriction on goals credit for recognized in their own policies and homes, and that the GSEs themselves mortgages with excessive fees does not, many of the commenters pointed out as have determined not to purchase. While of course, supplant the restriction on well, while good mortgage lending originating such loans is not illegal, but goals credit for HOEPA loans. If a practices can reduce costs to borrowers, rather made subject to additional mortgage has fees that exceed 5 percent contrary practices can result in loans disclosures and protections under of the loan amount as described in the that are higher cost to borrowers in ways HOEPA, loans at these levels should not immediately preceding paragraph, but that are not directly reflected in the be encouraged by receiving credit under do not exceed the 8 percent/$451 interest rate, points, or fees. Therefore, the goals. In incorporating the HOEPA threshold under HOEPA, the mortgage to remove any goals incentive for the high cost loan standards in this rule, the would not receive credit toward the GSEs to purchase mortgages or thresholds are subject to adjustment by goals. HUD, Treasury, the GSEs, and categories of mortgages regarding which the Federal Reserve Board 41 or many others have recognized that there is evidence that lenders engaged Congress. This rule is established to mortgages with excessive fees are a in specific practices contrary to good encompass such adjustments unless the particularly onerous problem and lending practices identified in the rule, GSEs are otherwise notified in writing disproportionately affect the low- and this rule provides that the GSEs may not by HUD. While HOEPA itself only moderate-income borrowers that the receive goals credit for such loans or covers closed end loans made to GSEs are to serve. Therefore, this final categories of loans. These specific refinance existing mortgages and closed rule will remove any incentive under practices identified in this rule that end home equity loans, this final rule the goals for the GSEs to purchase loans lenders employ to avoid abusive lending also applies the HOEPA thresholds to with excessive fees as described above. include regularly reporting complete home purchase mortgages. Having said that, the HUD/Treasury borrower information to credit agencies, (2) Mortgages with Unacceptable report called upon the Federal Reserve avoiding steering borrowers to higher Terms or Conditions or Resulting from Board to expand the HOEPA ‘‘points cost products, and complying with fair Unacceptable Practices. This final rule and fees’’ threshold to include certain lending requirements. also disallows goals credit for dwelling additional types of fees, including (i) FHEFSSA and HUD’s GSE regulations units financed by mortgages with fees and amounts imposed by third at 24 CFR 81.41, prohibit the GSEs from features that the GSEs themselves, either party closing agents (except payments discriminating in any manner in making
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Since provide financing for borrowers with proposed allowing the use of estimated abusive lenders often specifically target slightly impaired credit through rents for multifamily units with missing and aggressively solicit homeowners in innovative products that can bring data, subject to HUD review and predominantly lower-income and competition and efficiencies to the approval of the data sources and minority communities who may lack legitimate subprime market. methodologies used in computing them. sufficient access to mainstream sources While the GSEs themselves will The Department asked for comment on of credit, it is essential that the GSEs presumably be obtaining certain whether it should establish a percentage scrutinize lender practices to protect additional data and information to carry ceiling on the use of estimated rents. against buying loans that are the result out their previously announced HUD further proposed that, in cases of unlawful discrimination. For purchase restrictions and to monitor where multifamily rents are missing and example, good lending practices that lending practices, HUD is not where application of estimated rents is help lenders avoid unlawful establishing any requirements for not possible, such units be excluded discrimination include employee additional data to carry out these from both the denominator and training programs, periodic loan provisions under this rule. numerator for purposes of calculating sampling, specifically tailored Subsequently, HUD plans to request performance under the Low- and recordkeeping and reporting only such additional data as is Moderate-Income Housing Goal and the requirements, and other reviews. The necessary. In this regard, HUD will Special Affordable Housing Goal. The GSEs have reported, consistent with consult with the GSEs, as practicable, to Department requested comment on their pledges not to buy certain harmful develop reasonable data reporting whether it should establish a percentage loans, that they will be looking closer at requirements that will not present an ceiling for the exclusion of multifamily the lending practices of entities with undue additional burden. units with missing data from the denominator for goal calculation which they do business, and HUD 12. Data On Unit Affordability, § 81.15 commends those efforts. HUD will purposes. review the processes the GSEs employ The GSEs have reported that at times (2) Summary of Comments. Several to ascertain positive practices to avoid it can be difficult and costly for them to commenters endorsed the concept of unlawful discrimination and steering obtain the data on incomes and rents using estimated data to calculate borrowers to higher cost products, as that is necessary to establish performance toward the Low- and well as monthly credit reporting. This affordability for goals purposes, Moderate-Income Housing Goal and the final rule provides that where HUD especially for seasoned loan Special Affordable Housing Goal when finds evidence that loans or categories transactions and some negotiated multifamily rent data are missing. No of loans do not conform to such positive transactions. HUD proposed to allow (1) commenters indicated opposition to practices, HUD may deny goals credit the use of estimation techniques to allowing the use of estimated rents. for such loans in accordance with approximate unit rents in multifamily In its comments, Fannie Mae stated § 81.16(d) of this rule. properties where current rental that HUD should, in order to provide HUD recognizes that the particular information is unavailable and (2) the operational certainty, incorporate an loan terms and practices that are exclusion of units, both single family approved methodology into the identified as abusive and unacceptable and multifamily, from goal calculations regulations for estimating rents on may change as some unscrupulous where it is impossible to obtain full data multifamily properties where actual rent actors adjust to new restrictions and as or estimate values, subject to certain data are missing. Freddie Mac the GSEs and HUD gain experience with limits. commented that the GSEs should be abuses. Accordingly, to allow flexibility As has been discussed, GSE purchases given the choice of whether to provide this rule allows the Department to of mortgages on rental properties estimated rents or to exclude units from modify the list of terms and practices disproportionately serve the affordable the denominator for purposes of that will not receive goals credit, by housing market. Typically, around 90 calculating goals performance in providing that the GSEs may request percent of rental units backing GSE instances of missing multifamily rent modifications to the list and that the mortgage purchases would count data. Secretary will after reviewing such towards the Low- and Moderate-Income In cases where calculation of submissions determine whether or not Housing Goal and around 50 percent estimated rents is not feasible, a number to change the abuses for which goals would meet the affordability of commenters wrote in support of credit will be restricted. HUD also will requirements of the Special Affordable excluding the units in question from the continue to monitor the mortgage Housing Goal (excluding missing data). denominator as well as the numerator industry with regard to abusive lending HUD did not want the lack of data on for purposes of calculating performance practices and may determine that future affordability to act as a disincentive for toward the Low- and Moderate-Income modifications are necessary and require the GSEs to purchase mortgages in these Housing Goal and the Special further rulemaking. important sectors, which have been Affordable Housing Goal. One The restrictions and provisions in identified by HUD as having substantial commenter opposed such exclusion, sections (1), (2), and (3), above, address unmet credit needs in the mortgage noting that by including all multifamily terms and practices that are harmful to market. While single family owner- units in the denominator whether or not mortgage borrowers. Accordingly, these occupied units are also affected by the GSEs have the required income and restrictions and provisions in this rule missing data, these units are typically rent data places a more serious burden apply to mortgages purchased through not as affordable as the GSEs’ rental on the GSEs to obtain the data and focus the GSEs’ ‘‘flow’’ business, as well as purchases. Consequently, the provision on affordable lending in the multifamily mortgages purchased or guaranteed in the proposed rule to exclude units area. through structured transactions. Since from the numerator and denominator for With regard to the issue of percentage these restrictions and provisions are single family owner-occupied properties ceilings, Freddie Mac suggested a two- consistent with the GSEs’ own is limited to properties located in lower percent (2%) ceiling on the exclusion of measures, the Department does not income areas and is subject to a cap. multifamily units from the denominator
VerDate 112000 18:02 Oct 30, 2000 Jkt 194001 PO 00000 Frm 00029 Fmt 4701 Sfmt 4700 E:\FR\FM\31OCR2.SGM pfrm08 PsN: 31OCR2 65072 Federal Register / Vol. 65, No. 211 / Tuesday, October 31, 2000 / Rules and Regulations because of missing rents. Other implementation and its effects on affordable when, in fact, there is commenters suggested alternative calculated goals performance. approximately a 90 percent probability limits, e.g., a half-of-one percent (0.5%) Withdrawal of Departmental approval of that such units do meet the ceiling or a one-percent (1%) ceiling for an estimated affordability methodology requirements of the Low- and Moderate- the combined total of multifamily units could be warranted if evidence becomes Income Housing Goal. Similar with estimated rent and units excluded available indicating that use of arguments could be made with regard to from the denominator. Only Fannie Mae estimated affordability methodologies is the Special Affordable Housing Goal. indicated opposition to such a ceiling, unreliable or has undermined GSE Therefore, a percentage ceiling on writing that ‘‘Enforcement of percentage incentives to collect and maintain rent removal of units from the denominator ceilings will perpetuate penalties data. as well as the numerator is not against and create a disincentive for HUD does not believe it is necessary necessary or warranted at this time. Fannie Mae to engage in the very to codify in the regulations the specific b. Single Family Rental Units. business that HUD has identified for methodology for estimating affordability (1) Overview. The Department further expanded penetration—single family, data. The concept of estimating proposed to exclude rental units in 1– owner-occupied, 2–4 unit housing and affordability data is new relative to the 4 unit properties with missing rent data small multifamily rental properties.’’ affordable housing goals. Both HUD and from the denominator as well as the (3) HUD’s Determination. In order to the GSEs need to evaluate the numerator in calculating performance promote liquidity in the multifamily implications of the methodology under the Low- and Moderate-Income mortgage market, including mortgages proposed, monitor performance over Housing Goal and the Special on properties which may not have time using such data, evaluate new data Affordable Housing Goal. HUD asked for current data on the affordability of such sources that may become available and comment on whether it should establish units the Department believes that it is become more predictive. HUD needs the a percentage ceiling for such exclusions. reasonable for the GSEs to provide flexibility to make changes and This final rule retains the provision estimated affordability data for such refinements to the approved excluding rental units in 1–4 unit properties, which would be utilized for methodology based on experience, properties with missing rent data from purposes of calculating performance without unnecessary limitations. In the numerator and the denominator in toward the Low- and Moderate-Income approving any methodology and data calculating performance under the two Goal and the Special Affordable sources, HUD will, of course, be goals. These properties Housing Goal as long as the data sources mindful of the GSEs’ needs for disproportionately serve affordable and methodology are reliable. The data operational certainty in making housing markets and the GSEs should sources and methodology used by a GSE determinations. be active in this segment of the market. to estimate affordability data are, With regard to circumstances where As the Department is awarding bonus therefore, subject to HUD review and estimation of affordability on points for the units in owner-occupied approval. Estimated affordability data multifamily properties with missing single family rental properties, the GSEs may be used up to a maximum of five data is not feasible, HUD believes it is have a large incentive to obtain the (5) percent of units backing GSE reasonable to exclude such units from required affordability data. When the multifamily purchases in any given the denominator as well as the data is not available, however, the year. numerator for purposes of calculating Department does not wish to create a In its evaluation of whether to accept performance toward the Low- and disincentive to purchase mortgages on a proposed methodology for estimating Moderate-Income Goal and the Special these properties simply because affordability data, the Department will Affordable Housing Goal. The affordability data is not available. seek to determine: (a) The reliability of Department does not believe that a (2) Summary of Comments. A number the data source(s) used including the percentage ceiling on the exclusion of of commenters wrote in favor of size of the sample used; (b) the accuracy multifamily units with missing data excluding rental units in 1–4 unit of the calculations; and (c) the from the denominator is needed in order properties from the denominator as well reasonableness of the proposed to preserve incentives for data as the numerator for purposes of methodology with regard to providing collection, and could actually be calculating performance toward the an unbiased measure of GSE harmful from the standpoint of the Low- and Moderate-Income Housing performance toward the Low- and reliability of the housing goals as a Goal and the Special Affordable Moderate-Income Housing Goal and the measure of actual GSE performance. Housing Goal when rent data are Special Affordable Housing Goal, Because the percent of multifamily units missing. No commenters indicated including the degree to which the qualifying for the Low- and-Moderate opposition to such exclusion. methodology accurately predicts Income Goal is so much higher than the Writing in support of the ceiling affordability information and goals average across all property types (over concept, Freddie Mac suggested a two- performance on units backing GSE 90 percent for multifamily, compared percent (2%) ceiling on the exclusion of acquisitions in cases where current with approximately 45 percent overall), single family rental units from the affordability data are known. The GSEs an incentive will remain in place for the denominator. Fannie Mae objected to will be required to certify that any GSEs to collect rent data or obtain such a ceiling, commenting that a proposed estimated affordability reliable estimated rents wherever it is ceiling was unnecessary given that it is methodology meets these standards. feasible to do so. For the same reason, in Fannie Mae’s interest to obtain rent Methodologies that tend to understate the Department believes that applying a data on single family rental properties actual rents, or which otherwise tend to ceiling on exclusion of units from the when it is cost effective to do so. Other overstate the affordability of GSE denominator as well as the numerator commenters endorsed a percentage multifamily mortgage purchases or for goal calculation purposes would ceiling on the number of single family exaggerate GSE goals performance undermine the reliability of the Low- rental units that would be excluded relative to actual performance, will not and Moderate Income Goal as a measure from the denominator as well as the be considered acceptable by HUD. of actual GSE performance, since numerator for purposes of calculating Once a methodology is approved, the multifamily units above the ceiling performance toward the Low- and Department will closely monitor its would be counted as not being Moderate-Income Housing Goal and the
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Special Affordable Housing Goal when by lenders and secondary market chose to purchase a property in a rent data are missing. institutions as part of the loan higher-income area.’’ While opposed, in Fannie Mae and Freddie Mac both underwriting process. principle, to the concept of a ceiling on suggested that the use of estimated rents The Department’s decision to allow the exclusion of missing single family should be permitted for single family the estimation of affordability data with owner-occupied units from the rental properties with missing data. the limitations provided in this rule for denominator for goals calculation (3) HUD’s Determination. With regard multifamily rental units affords an purposes, Fannie Mae stated that any to single family rental units with opportunity to pilot the estimated rent ceiling established by the Department missing rent data, HUD believes it is methodology in an appropriately should be set at ‘‘not less than two reasonable to remove such units from controlled environment. percent.’’ the denominator as well as the c. Single Family Owner-Occupied Similarly, Freddie Mac wrote that ‘‘A numerator for purposes of calculating Units. substantial fraction of mortgages in performance toward the Low- and (1) Overview. The Department also above-average income tracts are made to Moderate-Income Goal and the Special proposed to exclude single family low- and moderate-income families’ Affordable Housing Goal. Because of the owner-occupied units from the citing 1998 HMDA data in support of high degree of affordability of single denominator as well as the numerator this contention. Consequently, family rental units, the Department does for purposes of calculating performance ‘‘geographic restrictions would not believe that a percentage ceiling on toward the Low- and Moderate-Income erroneously exclude many low- and exclusion of single family rental units Housing Goal and the Special moderate-income loans from with missing data from the denominator Affordable Housing Goal when data on performance measures.’’ is needed in order to preserve incentives borrower income are missing, provided Several commenters endorsed HUD’s for data collection, and could actually the unit is located in a census tract with proposed one percent ceiling on be harmful from the standpoint of the median income less than or equal to exclusion of single family owner- reliability of the housing goals as a area median. HUD proposed to restrict occupied units with missing data from measure of actual GSE performance. this exclusion up to a ceiling of one the denominator although some HUD will monitor the GSEs’ use of percent (1%) of the total number of commenters thought the ceiling should missing data provisions to ensure that single family, owner-occupied dwelling be lower than one percent. A number of they are being used in a reasonable way. units eligible to be counted toward the other commenters expressed opposition The Department has determined not respective housing goal. to this ceiling. No comments were to permit the use of estimated This final rule retains the provision to received on the geographic restrictions affordability data where it is missing for exclude single family owner-occupied aside from those from the GSEs. single family rental units. There are mortgages from both the numerator and (3) HUD’s Determination. several reasons why HUD believes this the denominator when borrower income With regard to single-family owner- a reasonable and prudent decision. is missing for properties located in occupied units with missing income A decision to exclude units with lower income areas subject to a one data, HUD believes it is reasonable to missing affordability data from the percent maximum. remove such units from the numerator as well as the denominator (2) Summary of Comments. A number denominator as well as the numerator for certain goals calculation purposes on of commenters wrote in favor of up to one percent of the eligible total for single family rental properties removes excluding at least some single family purposes of calculating performance a potential disincentive to an expanded owner-occupied units from the toward the Low- and Moderate-Income GSE presence in the markets for denominator as well as the numerator Goal and the Special Affordable mortgages on single family rental for purposes of calculating performance Housing Goal provided such units are properties at the same time. The toward the Low- and Moderate-Income located in tracts where median income Department believes this segment of the Housing Goal and the Special is less than or equal to area median market has unmet credit needs. To Affordable Housing Goal when income income. encourage the GSEs to move into this data are missing. One commenter The percentage ceiling and the market, it is awarding bonus points for indicated opposition to such exclusion. restriction to tracts where median the rental and owner-occupied units in Both Fannie Mae and Freddie Mac income is less than or equal to area owner-occupied single family rental expressed opposition to restricting the median income are both necessary in properties. The use of bonus points will exclusion of single family owner- order to ensure that the exclusion does serve as an additional incentive to the occupied units with missing income not result in undue exaggeration of GSE GSEs to obtain the necessary data from the denominator only in performance as calculated in achieving affordability data in order to obtain lower-income areas. They recommended the housing goals as compared to actual bonus credit. a two percent ceiling without these performance. Because single family Furthermore, HUD calculates geographic restrictions. owner-occupied units are significantly affordability of single family rental units In its comments, Fannie Mae stated less affordable than all other property for purposes of the housing goals using that ‘‘the place-based restriction that types in the conventional, conforming origination-year rents, in contrast to HUD proposes implies an unreasonable mortgage market according to HUD’s multifamily, where acquisition year assumption that all the units that are estimates (approximately 36 percent rents are used. While acquisition year missing data outside of the low-income single family owner-occupied units rents on multifamily properties may census tracts are not affordable. The meet the Low-and Moderate-Income sometimes be difficult to provide on effect of the cap is to deny credit for Housing Goal, compared with 45 seasoned and negotiated transactions units that are missing data and even percent overall), excluding single family where lenders have not continued to when those units have some statistical owner-occupied units with missing data collect annual rent data following loan likelihood of serving loans to low- and from the denominator as well as the origination, this situation does not moderate-income borrowers. HUD’s numerator could significantly raise the apply to single family rental properties, proposed methodology treats loans to proportion of GSE acquisitions counting since information on rent at the time of low- and moderate-income borrowers toward the Low-and Moderate-Income loan origination is ordinarily required differently simply because the borrower and Special Affordable Housing Goals
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These median serves to increase the likelihood denominator as well as the numerator provisions are included in the final rule that the affordability characteristics of for purposes of calculating performance with three specific changes based on the the excluded units resembles that of the toward the Underserved Areas Goal up comments received. The changes made ‘‘typical’’ GSE purchase, further limiting to a maximum of 0.5 percent of the total. in the proposed language relate to the the bias that would otherwise be The Department has not determined, satisfactory CRA requirement for introduced. however, that it is reasonable to remove Federally insured financial institutions, In HUD’s view, the proposed units with missing geographic identification of other institutions and/ geographic restriction on the exclusion information from the denominator as or organizations presumed to meet the of missing single family owner-occupied well as the numerator for purposes of recycling requirements, and the units from the denominator as well as calculating performance toward the treatment of third party originations the numerator for certain goals Underserved Areas Goal. In those under the recycling provision. Changes calculation purposes is, therefore, limited instances where census tract (for made in the final rule on these three reasonable and necessary to correct for metropolitan areas) or county (for aspects are discussed in more detail the bias that would otherwise be nonmetropolitan areas) cannot be below. introduced even with a one-percent determined using automated methods, c. CRA Requirement. ceiling. Fannie Mae’s contention that manual methods can be used. (1) Summary of Comments. Overall commenters supported the proposed ‘‘the place-based restriction that HUD 13. Seasoned Mortgage Loan Purchases changes identifying specific criteria and proposes implies an unreasonable ‘‘Recycling’’ Requirement assumption that all the units that are standards for the recycling missing data outside of the low-income a. Overview. Under section requirements. However, many census tracts are not affordable’’ is not 1333(b)(1)(B) of FHEFSSA, 42 special commenters disagreed with HUD’s pertinent to HUD’s determination. The rules apply for counting purchases of requirement that a financial institution Department made no such assumption. portfolios of seasoned mortgages under subject to CRA examinations must have HUD is well aware that many low- the Special Affordable Housing Goal. received ‘‘at least a satisfactory income borrowers choose to live in Specifically, the statute requires that performance evaluation rating for at tracts with median income above the purchases of seasoned mortgage least the two most recent examinations area median, as pointed out by Fannie portfolios receive full credit toward the under the Community Reinvestment Mae. Conversely, however, a significant achievement of the Special Affordable Act’’ to be presumed to meet the number of above median-income Housing Goal if ‘‘(i) the seller is engaged recycling requirements. borrowers choose to live in tracts with in a specific program to use the Fannie Mae, Freddie Mac and several median income below the area median. proceeds of such sales to originate other commenters suggested that a HMDA data does, however, show a additional loans that meet such goal; satisfactory performance evaluation strong correlation between borrower and (ii) such purchases or refinancings rating on the most recent examination is income as a percent of area median and support additional lending for housing sufficient, as opposed to the two most tract income as a percent of area that otherwise qualifies under such goal recent examinations, since the period median, suggesting that tract income to be considered for purposes of such between examinations can be as long as serves as a useful predictor of borrower goal.’’ 43 HUD refers to this provision as 60 months. A number of commenters of income. For example, in 1998, 55 the ‘‘recycling requirement.’’ noted that this could be a particularly percent of conforming, conventional The proposed rule suggested changes difficult requirement for small owner-occupied loans in tracts where to § 81.14(e)(4) of the current institutions, who are examined much median income was less than area regulations. The proposed language was less frequently. median were to low-and moderate- intended to provide guidance to the Other commenters suggested that two income borrowers. In contrast, only 33 GSEs with regard to the recycling consecutive outstandings is a more percent of loans in high-income tracts requirements described above and to suitable standard, as 78 percent of banks were to low-and moderate-income provide new, simpler rules when it is received satisfactory ratings in their borrowers. (Overall, 42 percent of single evident based on the characteristics of a 1999 CRA exams and about 75 percent family owner-occupied loans in HMDA mortgage seller that the recycling received these ratings in previous years. data were to low-and moderate-income requirements would likely be met. Still other commenters were borrowers.) HUD’s analysis of GSE loan- The rule proposed that certain supportive of HUD’s proposal of at least level data reveal a similar correlation categories of lenders could be presumed a satisfactory performance evaluation between borrower income as a percent to conduct a lending program meeting rating for at least the two most recent of area median and tract income as a the recycling requirements of the statute examinations under the Community percent of area median, although the and regulations. These categories Reinvestment Act because it would low-mod percentage of GSE acquisitions include federally regulated financial reduce the compliance burden of both is lower than in HMDA data. institutions with satisfactory ratings on the GSEs and depository institutions, Accordingly, HMDA findings support recent Community Reinvestment Act allowing them to spend more time on the conclusions that HUD’s proposed examinations and specific categories of the business of financing housing loans. geographic restrictions on the exclusion lenders with affordable housing (2) HUD’s Determination. HUD has of missing single family owner-occupied missions. reviewed these comments and noted data will (i) result in goals calculations b. Guidance Provided on Recycling that the proposed rule, in establishing that more accurately track actual Requirements. Commenters were the CRA examinations and ratings of performance than would otherwise be generally supportive of the overall financial depository institutions as a
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HUD has distinction between small and large of depository institutions, provided that reviewed the above comments and depository institutions as intended and these affiliates are subject to the CRA agreed to expand the safe harbor reflected in the CRA regulation 44 and examinations. provision to include the following the Gramm-Leach-Bliley Act of 1999. 45 With regard to the suggestion that the institutions or classes of institutions The 1995 CRA regulation distinguishes, standard for CRA examinations be two that the GSEs may presume meet the for examination purposes, four different consecutive outstanding ratings, the recycling requirements as long as these types of financial institutions based on Department believes that such a institutions have an affordable housing their size, structures, and operations: standard would be counterproductive. mission: State housing finance agencies; Small banks, large banks, wholesale The purpose of the standard is to affordable housing loan consortia; banks, and limited purpose banks. identify those financial institutions that Federally insured credit unions that are Accordingly, the 1995 regulation are in the business of serving affordable either (a) community development provides different performance housing markets. Using a satisfactory credit unions, or (b) credit unions that procedures, standards, ratings, and CRA examination rating achieves that are members of the Federal Home Loan cycles for small banks, large banks, purpose and is retained in the final rule. Bank System and meet the first-time wholesale banks, and limited purpose d. Classes or Categories of homebuyer standard of the Community banks. All of the procedures reflect the Organizations Presumed to Meet Support Program; community intent of the regulation to establish Recycling Requirement. development financial institutions; performance-based CRA examinations (1) Summary of Comments. With public loan funds; and non-profit that are complete and accurate but, to regard to other additional classes of lenders. The final rule retains the the maximum extent possible, mitigate institutions or organizations that should requirement that any additional classes the compliance burden for institutions. be recognized as meeting the recycling of institutions or organizations must be Under section 712 of the Gramm- requirements, most commenters, approved by the Department. The final Leach-Bliley Act, small banks with including the GSEs, agreed with HUD’s rule establishes a reasonable set of aggregate assets of not more than $250 proposal that State Housing Finance lender characteristics that are presumed million will be subject to routine Agencies or Special Affordable Housing to meet the recycling provisions that examination: Loan Consortia should be presumed to cover a large portion of the affordable • Not more than once every 60 meet the recycling requirements. lending market. For those lenders falling months for an institution that has However, both GSEs urged that HUD outside of these parameters, the final achieved a rating of ‘‘outstanding record provide them with ‘‘as much flexibility rule provides the GSEs with broad of meeting community credit needs’’ at as possible on this provision.’’ Fannie guidance as to what a recycling program its most recent examination; Mae opposed HUD approval of should include if a lender does not fall • Not more than once every 48 additional lending institutions or into an accepted category. The GSEs months for an institution that has organizations and, instead have broad latitude to evaluate the received a rating of ‘‘satisfactory record recommended that HUD provide a list of circumstances of a particular lender in of meeting community credit needs’’ at HUD-approved institutions, and criteria counting seasoned loan purchases its most recent examination. for the GSEs to qualify lenders or certain toward the Special Affordable Housing • As deemed necessary by the kinds of lending or transactions. Freddie Goal. A GSE does not have to get prior appropriate federal financial Mac suggested HUD ‘‘broaden the approval to do business with a lender supervisory agency for an institution regulatory presumption of recycling to that does not fall into the presumptive that has received a rating of ‘‘less than all sellers of mortgages so long as they category as long as the GSE verifies and satisfactory record of meeting originate or purchase qualifying special monitors that the lender is conducting community credit needs’’ at its most affordable housing goal mortgages in the an affordable lending program recent examination. ordinary course of business.’’ consistent with the guidelines provided. In view of the comments received and A great number of commenters Prior approval is only required if a seller based on its analysis of the 1995 CRA suggested that HUD’s list also include of loans falls outside the boundaries regulations and the Gramm-Leach-Bliley other ‘‘non-traditional lenders’’ who established in the final rule and the GSE Act of 1999, this rule includes the serve targeted communities and who wants them designated among the recycling requirement that a financial could potentially benefit from the category of institutions already institution have ‘‘at least a satisfactory liquidity that the change could provide. identified and presumed to meet the performance evaluation rating for at These commenters mentioned the requirements. The Department does not least the two most recent examinations following institutions: Community anticipate that such action will limit the under the Community Reinvestment development financial institutions, GSEs ability to conduct business in any Act’’ for large banks and wholesale minority owned lenders, women owned material way, but rather will relieve the banks that are subject to CRA lenders, non-profit lenders, and public burden of having to verify and monitor examinations. Limited purpose banks revolving loan funds. the lending programs of those entities are not making home mortgage loans Other commenters urged HUD to presumed to meet the recycling and therefore are not relevant for this include all credit unions in HUD’s list requirements. analysis. This final rule adds a because credit unions originate low-cost e. Third Party Transactions. provision for small institutions with residential loans that make housing (1) Overview. In the proposed rule, assets of no more than $250 million that affordable to millions of credit union HUD solicited comments on the such institutions must have received ‘‘a members even though they are exempt treatment under the recycling satisfactory performance evaluation from CRA requirements. At a minimum, provisions of structured transactions rating for the most recent examination it was suggested that ‘‘seasoned loans where the mortgage loans included in under the Community Reinvestment Act purchased from community the transaction were originated by a
VerDate 112000 18:02 Oct 30, 2000 Jkt 194001 PO 00000 Frm 00033 Fmt 4701 Sfmt 4700 E:\FR\FM\31OCR2.SGM pfrm08 PsN: 31OCR2 65076 Federal Register / Vol. 65, No. 211 / Tuesday, October 31, 2000 / Rules and Regulations depository institution or mortgage period, the purchase of such mortgages goals: mortgage loans under the HECM banker engaged in mortgage lending on would meet the intent of Congress and Program, mortgages guaranteed by RHS, special affordable housing but acquired, fulfill the spirit of the recycling and mortgage loans made under FHA’s packaged and re-sold by a third-party, requirement. Therefore, in this final Section 248 program and HUD’s Section e.g., an investment banking firm that is rule, HUD will allow mortgages 184 program for properties in tribal not in the business of affordable housing delivered by such third party sellers to lands. (This section has also been lending. meet the recycling presumptions in amended as described herein at (2) Summary of Comments. Fannie § 81.14(e)(4)(vi) and (vii) of this final paragraph 14, Expiring Assistance Mae believes that ‘‘the appropriate rule if the mortgages were originated by Contracts.) HUD also proposed that approach is to extend the streamlined an entity that comes within the other types of mortgages involving application to third party deliveries.’’ recycling presumptions; and the seller Federal guarantees, insurance or other Fannie Mae argues that when it acted for, or in conjunction with, such Federal obligation may be eligible for purchases loans delivered by third entity in the transaction with the GSE. credit under the goals if a GSE submits parties, it ‘‘is supporting the A seller that holds loans itself for more documentation to HUD that supports marketplace dynamic that provides than six months is not presumed to be eligibility for HUD’s approval and the liquidity,’’ and therefore ‘‘the acting for, or in conjunction with, such Department determines, in writing, that intermediate step in no way degrades an entity. Accordingly, the final rule the financing needs addressed by such the liquidity support provided to the excepts such sellers from the benefit of programs are not well served and that institutions or the mortgage products.’’ the presumption. Notwithstanding, a the mortgage purchases under such Freddie Mac did not address this seller that otherwise meets the tests of program should count under the issue directly but pointed out that the recycling provisions may qualify housing goals. Congressional intent underlying the under the rules on its own behalf. b. Summary of Comments. seasoned, recycling requirement was ‘‘to Moreover, in any case, if the mortgages Commenters other than the GSEs ensure that the proceeds will be used in were originated by an entity that does generally supported the proposed a manner that increases the availability not meet the recycling presumptions, change allowing goals credit for the of mortgage credit for the benefit of low- the GSEs can still get goals credit under GSEs’ purchases of HECMs and rural income families.’’ According to Freddie the Special Affordable Housing Goal if and tribal mortgages. They stressed the Mac, Congress’ interest was to ensure they verify and monitor that the need for liquidity for such programs and that ‘‘mortgage proceeds were funneled originator, acting in conjunction with a for encouraging the GSEs to better serve back into the mortgage market, not that seller, meets the recycling requirements these markets. They pointed out that specific types of lending programs in § 81.14(e)(4)(i) through (iv). these markets are still undeveloped and should be used to recycle these underserved. proceeds.’’ Thus, Freddie Mac 14. Counting Federally Insured Fannie Mae supported the proposed recommends that HUD include all Mortgages Including HECMs, Mortgages changes with regard to government mortgage sellers that regularly engage in on Housing in Tribal Areas and loans, but Freddie Mac made no originating or purchasing mortgages that Mortgages Guaranteed by the Rural comment. meet the special affordable housing goal Housing Service Under the Housing A few commenters recommended that criteria. The alternative, according to Goals HUD count all reverse mortgages, not Freddie Mac, would be ‘‘adoption of the a. Overview. Under § 81.16(b)(3) of just HECMs, toward the three goals. BIF/SAIF regulatory presumption while HUD’s regulations prior to this final Other commenters suggested that loans maintaining the current regulatory rule, non-conventional mortgages— guaranteed by the RHS’ Sections 538 scheme.’’ mortgages that are guaranteed, insured and 515 programs should also receive (3) HUD’s Determination. HUD or otherwise obligations of the United goals credit as they provide high quality recognizes that Congress intended that States—did not generally count under affordable multifamily housing for the housing goals generally and the the three housing goals. However, lower-income families in rural areas. recycling provisions specifically were to mortgage loans under the Home Equity Some commenters suggested that expand the availability of affordable Conversion Mortgage (HECM) Program HUD also should include all mortgages housing with particular emphasis on the and the RHS’s Guaranteed Rural that are supported in some way by state purchase of loans that are originated in Housing Loan Program have received and local governments. Others conjunction with affordable housing credit under the Special Affordable recommended that predevelopment programs, the creation of innovative Housing Goal. FHEFSSA specifically grants or loans, interim development or product lines, or the building of provides that mortgages that cannot be bridge financing, and permanent institutional capacity and infrastructure readily securitized through the financing be considered. among others in the industry.46 If the Government National Mortgage Fannie Mae objected to the proposal mortgages were, in fact, originated by an Association (GNMA) or another Federal for HUD’s review and approval of goals entity that meets the new recycling agency and for which a GSE’s credit for other types of government presumptions, i.e., is regularly in the participation substantially enhances the loan programs and requested that HUD business of mortgage lending; is a BIF- affordability should receive full credit provide a set of criteria for the GSEs to insured or SAIF-insured depository under the Special Affordable Housing apply and make their own institution; and is subject to, and has Goal. On this basis, those two categories determinations. According to Fannie received at least a satisfactory of mortgages would count under that Mae, the GSEs should receive goal performance evaluation rating under the goal if they finance housing for very credit for the purchase of specialized Community Reinvestment Act, or is low-income families or low-income government program loans if two among the enumerated class or classes families in low-income areas and meet conditions are met: (1) Loans are made of organizations whose primary recycling requirements if seasoned. under any federally-insured programs business is financing affordable housing In the proposed rule, HUD proposed (except for FHA loans insured under mortgages; but the mortgages were to amend § 81.16(b)(3) to count and give section 203(b) or VA loans insured delivered to the GSEs by a third party full credit for the following types of under the VA single family insurance seller after a relatively short holding mortgage loans toward all three housing program); and (2) the GSEs add valuable
VerDate 112000 18:02 Oct 30, 2000 Jkt 194001 PO 00000 Frm 00034 Fmt 4701 Sfmt 4700 E:\FR\FM\31OCR2.SGM pfrm08 PsN: 31OCR2 Federal Register / Vol. 65, No. 211 / Tuesday, October 31, 2000 / Rules and Regulations 65077 liquidity, lower costs, additional credit now count toward the goals, they no the GSEs should receive credit for such enhancements, or some other value to longer will be excluded from the actions. the financing of these loans. denominator of the GSEs’ mortgage b. Summary of Comments. c. HUD’s Determination. In view of purchases as are other non-conventional Commenters who addressed this issue this general support for the proposed loans that do not receive credit under were generally supportive of HUD’s changes and based upon its review of the goals. proposal to award credit for these data on the GSEs’ mortgage purchases of activities. Although Freddie Mac did HECMs, RHS mortgages and loans made 15. Expiring Section 8 Assistance not express an opinion in its comments, to Native Americans under FHA’s Contracts Fannie Mae expressed some support for Section 248 program and HUD’s Section a. Overview. Over 900,000 housing HUD’s approach. However, Fannie Mae 184 program, this final rule amends units in approximately 10,000 requested that HUD consider some § 81.16(b)(3) to except mortgages under multifamily projects have been financed revisions to its proposal. Specifically, the HECM program, single-family with FHA-insured mortgages and Fannie Mae suggested that HUD mortgages guaranteed by RHS under the supported by project based Section 8 broaden its definition of actions which Section 502 program, and loans made housing assistance contracts.47 Many of would receive credit to include the under FHA’s Section 248 program and these contracts will expire over the next purchase of FHA-insured mortgages, HUD’s Section 184 program on five years. A significant portion of these mortgage revenue bonds and equity properties in tribal lands from the contracts currently provide for rents for investments, including Low Income general exclusion from goals credit for assisted units that substantially exceed Housing Tax Credits. Fannie Mae non-conventional loans. This final rule the rents for comparable unassisted suggested that HUD strike the language allows goal credit for those specific units in the local market. Simply ‘‘* * * as determined by HUD’’ from Federally insured or guaranteed reducing rents to a level which may not the final rule to avoid a regulatory mortgage loans. support the project’s debt service would process that requires prior HUD As proposed, the final rule provides risk likely defaults on the FHA-insured approval for determining goals credit. that HUD will review other types of mortgage payments resulting in Fannie Mae also suggested that actions mortgages involving Federal guarantees, substantial claims to FHA’s insurance qualifying for credit under this section insurance or other Federal obligation for funds. should always receive full, rather than goals credit. HUD’s review of the GSEs’ In October 1997, Congress enacted the partial, credit. non-conventional mortgage purchases is c. HUD’s Determination. HUD has Multifamily Assisted Housing Reform needed, among other reasons, to ensure determined that it is both appropriate and Affordability Act of 1997 (MAHRA; compliance with FHEFSSA, which and consistent with the statutory 42 U.S.C. 1737f) specifically to address permits mortgages that cannot be readily mandates of FHEFSSA and MAHRA securitized through GNMA or another the problem of expiring contract for that actions taken by the GSEs to assist Federal agency and for which a GSE’s project-based Section 8 rent subsidies in maintaining the affordability of participation substantially enhances for certain multifamily rental projects, assisted multifamily units with expiring liquidity, to receive full credit under the most of which are insured by FHA. contracts receive goals credit as part of Special Affordable Housing Goal. In MAHRA authorized a new Mark-to- the GSEs’ contributions in meeting their view of the ample liquidity among the Market Program designed to preserve housing goals as determined by the great majority of FHA loans, HUD must low-income rental housing affordability Secretary. HUD’s current counting rules exercise ongoing responsibility to while reducing the long-term costs of permit the GSEs to receive full credit for evaluate whether the GSEs’ mortgage Federal rental assistance for these purchases of mortgages or interests in 48 purchases under non-conventional projects. MAHRA establishes mortgages as set forth in 24 CFR 81.16. mortgage programs (other than HECM processes and standards for debt Those rules address goals eligibility program, specified RHS mortgage restructuring under the program where standards for credit enhancements, the programs, and FHA’s Section 248 it is determined that such restructuring purchase of refinanced mortgages, program and HUD’s Section 184 is appropriate and necessary. mortgage revenue bonds and risk- program on properties in tribal lands) MAHRA also amended section sharing. Because HUD intends that goals should count under the Special 1335(a) of FHEFSSA (12. U.S.C. credit for actions in conjunction with Affordable Housing Goal. Beyond its 4565(a)(5)) to require Fannie Mae and expiring assistance contracts should responsibility under the Special Freddie Mac to ‘‘assist in maintaining conform to actions that are already Affordable Housing Goal, HUD must the affordability of assisted units in awarded credit in other transactions, continually determine whether goals eligible multifamily housing projects HUD has determined that it is not credit should be provided for particular with expiring contracts.’’ MAHRA necessary to restate these rules with GSE purchases. HUD has evaluated and amendments further stipulate that such respect to eligibility of actions for goals considered the specific programs actions shall constitute part of the credit that assist the Mark-to-Market enumerated above and, at this time, is contribution of each GSE toward program. Accordingly, this final rule able to determine that goals credit meeting its housing goals as determined revises the language to eliminate should be given for the GSEs purchases by the Secretary. In the proposed rule, redundancies by referencing current of mortgages under these programs HUD proposed to provide partial to full regulations. because these purchases will address credit under the housing goals as HUD agrees with Fannie Mae that the credit needs that are not well served. determined by HUD for actions that purchase of FHA-insured mortgages For other programs, HUD must make the maintain the affordability of assisted resulting from restructured financings of same careful and complete evaluation units in eligible multifamily housing projects with expiring assistance before it can decide in accordance with projects with expiring contracts include contracts is an appropriate activity to FHEFSSA whether goals credit is the restructuring or refinancing of include in actions eligible for goals warranted. mortgages, and credit enhancements or credit. Accordingly, HUD has amended This final rule retains a provision that risk-sharing arrangements to modified § 81.14(e)(3) to specify that purchases of to the extent categories of non- or refinanced mortgages. HUD solicited mortgages on projects with expiring conventional mortgage purchases that comments on how and to what extent assistance contracts that meet the
VerDate 112000 18:02 Oct 30, 2000 Jkt 194001 PO 00000 Frm 00035 Fmt 4701 Sfmt 4700 E:\FR\FM\31OCR2.SGM pfrm08 PsN: 31OCR2 65078 Federal Register / Vol. 65, No. 211 / Tuesday, October 31, 2000 / Rules and Regulations requirements of 12 U.S.C. actions that are required under MAHRA options or rights of first refusal to 4563(b)(1)(A)(i) and (ii) will receive full and that may count under FHEFSSA. acquire mortgages; mortgage purchases credit toward achievement of the special A few commenters expressed concern financing secondary residences; affordable housing goal. about the counting treatment for purchases of non-conventional This final rule also clarifies the mortgage purchases on projects with mortgages and government housing counting treatment for actions a GSE expiring contracts that ‘‘opt out’’ of the bonds except under certain takes to modify or restructure the terms assisted program. One commenter circumstances. As provided in of mortgages with expiring assistance suggested that HUD impose additional § 81.16(c), HUD has determined that contracts which it may hold in portfolio, affordability requirements as a certain other transactions, including provided such restructuring results in condition of awarding goals credit for credit enhancements in certain lower debt service costs to the project’s such transactions. However, HUD finds situations, REMIC purchases and owner. HUD has added § 81.16(c)(9)(ii) that the issue of affordability relative to guarantees in certain circumstances, and to provide full credit under any housing goals credit is already well established. others, do count as mortgage purchases. goal for these activities. HUD’s current regulations address the HUD believes that, in order to meet HUD has reviewed comments from income requirements for determining higher goal levels, the GSEs will need to Fannie Mae, Freddie Mac, and others how mortgage purchases are counted continue to develop new products and regarding awarding goals credit for under any of the housing goals. There approaches while also remaining equity investments, particularly Low are other statutory provisions that also mindful of FHEFSSA’s requirements. Income Housing Tax Credits (LIHTCs). address long-term affordability. Projects HUD invited comment on this proposal. These comments, while not necessarily that rely upon or intend to rely upon b. Summary of Comments. offered in response to this section of the equity investments from the LIHTC Commenters who addressed this issue generally offered support for the proposed rule, indicate a continuing program must meet tax code proposal. Some commenters, however, interest in counting these transactions requirements for affordability for a 15- 50 confused HUD’s proposal to review under the goals. The Department agrees year period. Mortgages secured by classes of transactions for goals counting that the GSEs’ participation in LIHTCs projects subject to restructuring plans treatment with the Department’s New plays a vital role in the development of must provide for a Use Agreement that Programs Approval authority as set forth affordable housing. By excluding these includes affordability restrictions and 51 in § 81.51 which relates to HUD’s investments from goals credit HUD does remains in effect for at least 30 years. review of a new GSE activity to not intend to convey any lack of HUD believes that the current counting rules and statutory definitions under determine whether it is a new program appreciation for their importance. FHEFSSA and MAHRA are sufficient to and whether it is authorized under the However, FHEFSSA imposes certain ensure that goals credit is awarded GSE’s charter and in the public interest. standards on what can and cannot be appropriately for mortgage purchases The provision in § 81.16(d) of the counted towards the housing goals.49 that meet prescribed housing proposed rule concerns instead whether Specifically, only mortgage purchases affordability standards. a class of transactions counts as as defined in FHEFSSA and the mortgage purchases that will receive implementing regulation meet the 16. Provision for HUD to Review New credit under the housing goals. In standard for eligibility. As described in Activities To Determine Appropriate HUD’s proposed rule, no regulatory the preamble to HUD’s 1995 regulation, Counting Under the Housing Goals changes to the New Programs Approval the purchase of LIHTCs is not a a. Overview. In order to address authority were proposed. mortgage purchase or the equivalent of confusion about whether a given Of the comments received, Fannie a mortgage purchase and, therefore, is transaction will receive credit under the Mae addressed the issue of counting not eligible for goals credit under HUD’s housing goals, HUD proposed adding a classes of transactions under the goals general counting requirements as set provision at § 81.16(d) to further clarify in some detail. Generally, Fannie Mae forth in the implementing regulation. its position regarding HUD’s authority expressed an overall objection to any While MAHRA does provide that review new activities, or classes of regulatory provisions that would require actions to maintain the affordability of transactions, to determine appropriate prior HUD approval for goals counting assisted units under MAHRA will count counting treatment under the housing purposes, believing instead that HUD under the goals, MAHRA does not goals. should codify clear but flexible rules specifically impose standards for While the GSEs participate in that remove all uncertainty regarding counting actions with respect to transactions and activities that support goals counting treatment. Fannie Mae expiring assistance contracts under the community and housing development further stated that prior HUD review goals but leaves this matter to HUD’s in general, FHEFSSA is clear that only could ‘‘put in place a disincentive to the determination. In determining whether ‘‘mortgage purchases’’ count toward development of new and innovative actions count under the goals, HUD will performance on the housing goals. products.’’ Fannie Mae did not suggest generally be guided by definitions and Section 81.16(a) of the regulations any specific examples of classes of counting conventions set forth in the stipulates that the Secretary shall transactions or characteristics that HUD implementing regulation. In instances consider whether a transaction or should exclude from a prior review where a GSE engages in actions not activity of the GSE is substantially process nor did it specify how specified in the implementing equivalent to a mortgage purchase and regulatory guidance could be regulation but which it believes warrant either creates a new market or adds constructed to address future events. goals credit, or where a GSE provides liquidity to an existing market. As However, Fannie Mae did suggest that more than one form of assistance for a provided in § 81.16(b), HUD has HUD impose a 30-day time frame for single project, the GSE must submit the determined that certain transactions do review after which the transaction(s) transaction to HUD for a determination not meet those criteria and, therefore, would be approved for goals credit on the appropriate level of credit to be will not count toward a GSE’s housing unless HUD had notified the GSE awarded if the goals credit is sought. In goals performance. Examples include otherwise during the review period. making a determination, HUD will equity investments in housing Another commenter expressed award counting treatment for those development projects; commitments, concern that HUD intends to count
VerDate 112000 18:02 Oct 30, 2000 Jkt 194001 PO 00000 Frm 00036 Fmt 4701 Sfmt 4700 E:\FR\FM\31OCR2.SGM pfrm08 PsN: 31OCR2 Federal Register / Vol. 65, No. 211 / Tuesday, October 31, 2000 / Rules and Regulations 65079 transactions that are not formally implemented § 81.16(d) as originally HUD agrees with this comment. mortgages if HUD believes they serve a proposed. Accordingly, this final rule implements new market or add liquidity to an the proposed changes to § 81.2 and to 17. Counting Rules—Clarifying existing market, thereby potentially § 81.16(b)(9), with slight revisions to Technical Provisions allowing the GSEs to expand their § 81.16(b)(9) to avoid any potential activities into areas now served by a. Especially Low Income. Section confusion. others. 81.14(d)(1)(i) of the regulations provides d. Title I. HUD proposed awarding the c. HUD’s Determination. In assessing that dwelling units in a multifamily GSEs half credit for purchases of these concerns, HUD believes that property will count toward the Special mortgage loans insured under HUD’s Fannie Mae’s suggestions for additional Affordable Housing Goal if 20 percent of Title I property improvement and codified regulatory guidance in lieu of the units are affordable to families manufactured homes program. Fannie any HUD review are impractical and whose incomes do not exceed 50 Mae and one other commenter asked unnecessary. The regulation already percent of the area median income. that the Department award full credit for includes numerous provisions that HUD’s regulations at §§ 81.17 through Title I mortgages saying that these address eligible transactions and their 81.19 stipulate that the income mortgages support affordable housing counting treatment. In fact, virtually all requirements are to be adjusted based needs. Fannie Mae noted that purchases transactions in current use which could on family size and provide adjustment of these loans were difficult transactions be substantially equivalent to a tables for qualifying family income to undertake and for this reason should mortgage purchase have been addressed where incomes do not exceed from 60 receive more than half credit. One other elsewhere in the counting rules. percent to 100 percent of area median commenter recommended that no goals Nevertheless, given the pace of income. However, there has been no credit be given for Title I loans, innovation in the mortgage and similar adjustment table provided for asserting that such loans do not directly investment markets and the likelihood families whose incomes do not exceed support affordable housing needs. that the GSEs will devise new lending 50 percent of area median income. HUD Given the limited number of and marketing approaches in the future, proposed to amend those sections to comments and their conflicting nature, providing a prior-review requirement to provide additional adjustment tables for the Department decided to retain the address goals counting treatment for such families. To be consistent, HUD provision in the final rule that these future transactions is both an also proposed to designate such families purchases of Title I loans will receive efficient and practical solution while a as ‘‘especially low-income families’’ for half credit under the housing goals. As more prescriptive approach may not be purposes of the Department’s GSE explained in more detail in the sufficiently foresighted or encompassing regulations and to reflect this change in appendices to this final rule, HUD has thereby disadvantaging both the public’s § 81.14. HUD received no comments on determined that such loans finance an and the GSEs’ interests. these proposals. Therefore, this final important source of affordable housing HUD regards concerns that by adding rule implements the changes as and an enhanced GSEs role could § 81.16(d) to the regulation, HUD is proposed in § 81.14 and §§ 81.17 improve the affordability of such loans opening the door to counting non- through 81.19. for lower-income families. mortgage transactions towards the goals b. Defining the ‘‘Denominator’’. HUD 18. Credit Enhancements as unwarranted. The regulatory proposed amending the calculation of language is explicit in stating that, in ‘‘Denominator’’ to clarify that the a. Overview. The GSEs utilize a large order to count towards goals denominator does not include GSE variety of credit enhancements, for both performance, transactions must be transactions or activities that are not single family and multifamily mortgage ‘‘mortgage purchases’’ in accordance mortgages or transactions that are purchases, to reduce the credit risk to with FHEFSSA. The regulatory language specifically excluded. HUD received no which they might otherwise be exposed. does not use ‘‘liquidity’’ as a criteria for comments on this proposed change, and For example, the GSEs generally require review and approval to count this final rule implements the change as the use of mortgage insurance on single transactions for goals credit, and proposed in 81.14(a)(2). family loans with loan-to-value ratios ‘‘liquidity’’ is not a defining element of c. Balloon Note Conversions. HUD exceeding 80 percent. While more ‘‘mortgage purchase’’ under this proposed to amend the definition of common in the multifamily mortgage regulation. Further, the regulation ‘‘Refinancing’’ at § 81.2 to exclude a market, seller-provided credit explicitly states which classes of conversion of a balloon mortgage note enhancements may also be required for transactions are currently ineligible, and on a single family property to a fully GSE purchases of single family mortgage it provides guidance on criteria amortizing mortgage note provided the loans. Other types of credit necessary for qualifying other classes of GSE already owns or has an interest in enhancements include arrangements transactions. Thus the plain meaning of the balloon note at the time of the such as credit enhancements in the regulations including the counting conversion. HUD also proposed structured transactions where a GSE rule conventions set forth in the amending the counting rules at may acquire a pool of loans, mortgage- regulation would preclude a broader § 81.16(b)(9) to exclude these backed securities (MBS), or real estate interpretation of § 81.16(d). transactions from the denominator. mortgage investment conduits HUD has further determined that Fannie Mae suggested deleting other (REMICs), and then create separate establishment of a time limit for HUD proposed language which sought to senior and subordinated securities, review of GSE requests to count clarify that single family loans with structured so that the subordinated transactions is unnecessary. While HUD conversion features which had already securities absorb credit losses; spread is aware of the need for responsive been exercised prior to purchase by the accounts, in which a GSE may create a action to a GSE’s request for guidance GSE would count as new purchases. special class of unguaranteed securities and will respond to such requests Fannie Mae believed this additional where pass-through payments will cease reasonably, rigid time frames may not language created confusion and was in the event of default of the underlying provide sufficient review of complex unnecessary stating that the revised mortgage collateral; acquisition of senior transactions to best serve the public definition of ‘‘Refinancing’’ at § 81.2 tranches of REMIC securities by the interest. Accordingly, HUD has already provided sufficient clarification. GSEs which are enhanced by the
VerDate 112000 18:02 Oct 30, 2000 Jkt 194001 PO 00000 Frm 00037 Fmt 4701 Sfmt 4700 E:\FR\FM\31OCR2.SGM pfrm08 PsN: 31OCR2 65080 Federal Register / Vol. 65, No. 211 / Tuesday, October 31, 2000 / Rules and Regulations presence of subordinate tranches and standard as an important risk commenter also supported limiting where the collateral is already credit management tool. Fannie Mae further goals credit on the GSEs’ purchase of enhanced prior to purchase; and agency stated that reducing goals credit based seasoned mortgages when the selling pool insurance coverage provided by a on the level of credit enhancement ‘‘is institution provides a credit mortgage seller. contrary to our charter, misconstrues the enhancement beyond customary Since enactment of FHEFSSA in 1992, purpose of Fannie Mae, distorts the representations and warranties, and also HUD’s regulations have awarded full efficient functioning of the capital supported some limitation on goals goals credit for the purchase of most markets, increases the cost of credit for loans securitized in mortgages or interests in mortgages that homeownership, restricts the commercial mortgage-backed securities otherwise qualify under the definition availability of capital, and weakens the (CMBS) and REMIC structures to the for each goal regardless of the level of financial soundness of Fannie Mae.’’ risk level of the tranches purchased by credit risk a GSE might bear in the Commenters representing state and the GSEs. transaction. However, the increasing local housing finance agencies, for- One commenter suggested that, in complexity of, and prevalence in, the profit and non-profit advocacy and assigning goals credit based on the use of credit enhancements have raised consumer groups, trade associations, GSEs’ actual involvement in facilitating questions about whether the GSEs and the mortgage lending and the flow of private capital into low/mod should receive full credit towards the investment industry were nearly communities, there may be a useful goals for transactions where their credit unanimous in voicing objections to any prototype in the CRA provisions for risk exposure is minimal. In the regulatory approach that considered allotting goals credit based upon the proposed rule, HUD sought comments levels of credit enhancements in type of mortgage purchase transaction, on various questions regarding the assigning goals credit. The recurring i.e., the purchase of newly originated appropriate goals treatment for objection held that such an approach loan versus other mortgage investments. transactions with credit enhancements. would undermine the purpose of the HUD appreciates this suggestion and For example, assuming credit risk can housing goals regulation by disrupting plans to consider it further. be measured, HUD asked commenters to the risk-sharing partnerships that are c. HUD’s Determination. HUD has consider whether HUD should establish critical to making affordable housing taken the position that GSE credit a sliding scale from 0 to 100 percent for lending a reality, thereby resulting in a enhancement transactions provide awarding goals credit depending on the negative consequence to needed liquidity to the mortgage GSE’s risk exposure in a transaction. homeownership. For example, some markets and play a key role in HUD also asked for comments on other commenters expressed concern that affordable housing lending. As issues including whether a minimum such an approach could interfere with explained in a study HUD has risk threshold should be established in the GSEs’ incentive to develop new undertaken with the Urban Institute to order for a transaction to receive any affordable mortgage products using risk- assess recent innovations in the goals credit as well as comments on sharing arrangements while others felt secondary market for low- and whether HUD should measure that reducing goals credit based on the moderate-income lending, the GSEs’ counterparty risk on seller-provided level of risk would have the effect of purchase of interests in CRA loans is credit enhancements. reducing the amount and liquidity of identified as one approach to how the b. Summary of Comments. The funds available for affordable housing enterprises facilitate liquidity for loans overwhelming majority of commenters, lending rather than force the GSEs to that do not conform to standard including Fannie Mae and Freddie Mac, take on more risk than they felt they guidelines.52 Investment analysts also responded with strong opposition to the could effectively manage. These report that the GSEs’ credit concept of basing goals credit on the commenters remarked that since risk enhancement of CRA REMIC securities level of credit risk borne by a GSE in the sharing arrangements allow more results in a more attractive debt transaction. Freddie Mac expressed industry partners to bring more capital instrument for investors and a higher concern that, in addition to being to the mortgage market, they were return for issuers which benefits lenders inconsistent with the Freddie Mac Act concerned that the affordable housing seeking to liquidate their CRA portfolios and FHEFSSA, discounting goals credit market would be adversely impacted if and ultimately borrowers. for protections against default cost HUD adopted a regulatory counting HUD recognizes there also are other would lead to a host of unintended scheme that penalized the GSEs for valid reasons to grant the GSEs full consequences and practical problems, sharing risk. credit under the housing goals for including measurement problems. For Two commenters, however, suggested mortgage purchase transactions example, with regard to multifamily there may be instances in which goals involving credit enhancements even mortgages especially, Freddie Mac credit should be limited and suggested where the enterprises bear relatively stated that ‘‘when cross-default or cross- further review and study of the issue. minimal credit risk. For example, in the collateralization techniques are used to One commenter stated that the financial absence of private mortgage insurance price credit enhancements, there is no benefits of GSE status can and should for multifamily mortgages, seller ready and straightforward method of function as an offset for the assumption provided credit enhancements allocating default cost protection to the of some amount of credit risk but also apparently are a viable means by which risks presented by the individual cautioned that HUD must carefully secondary market purchasers may mortgages, let alone to the housing units consider the effects of any regulatory delegate certain of their underwriting that are financed by each of those change in this area, especially how responsibilities and share risks. When a mortgages.’’ OFHEO and the financial markets GSE purchases a mortgage subject to a Fannie Mae also strongly opposed any would view encouraging the GSEs to recourse agreement or similar goals scoring approach based on the assume certain credit risks and what arrangement with the lender, the GSE level of credit enhancement. Fannie effect this approach could have on still retains credit risk with respect to Mae stated that credit enhancements are mortgage rates. Another commenter holders of the GSEs’ mortgage-backed essential to its safe and sound operation suggested that HUD establish an security or, where the mortgage is held and, in fact, are explicitly recognized industry working group to examine in portfolio, for its own account. Of under OFHEO’s risk-based capital these issues in greater detail. This course, even if the GSE is not bearing
VerDate 112000 18:02 Oct 30, 2000 Jkt 194001 PO 00000 Frm 00038 Fmt 4701 Sfmt 4700 E:\FR\FM\31OCR2.SGM pfrm08 PsN: 31OCR2 Federal Register / Vol. 65, No. 211 / Tuesday, October 31, 2000 / Rules and Regulations 65081 substantial credit risk, the GSE may still buyers of subordinated debt in the information to the public. This multi- be bearing other types of risk. For GSEs’ single family and multifamily file structure was designed to allow the example, the protection afforded to the mortgage transactions. In addition, HUD greatest dissemination of loan-level GSE under recourse agreements is will continue its assessments of credit data, without disclosing proprietary dependent on the soundness of the enhancement structures including data of the GSEs and causing party to whom the GSE has recourse. In newly introduced structures to competitive harm by, for example, addition, the GSE assumes interest rate determine how and to what extent, if allowing competitors to determine the risk for mortgages that are retained in any, HUD’s goal counting rules should GSEs’ marketing and pricing strategies portfolio. be modified in the future. at the local level. In analyzing credit enhancement On October 17, 1996, a Final Order issues, thus far, there has emerged no 19. Public Use Data Base and Public describing each data element submitted clear approach to establishing an Information by the GSEs and the proprietary or appropriate ‘‘risk threshold’’ associated Section 1323 of FHEFSSA requires nonproprietary nature of each element with mortgages purchased by a GSE, that HUD make available to the public was published in the Federal Register. below which credit toward the goals data relating to the GSEs’ mortgage The Final Order also recoded, adjusted, should not be granted. Under typical purchases. In the legislative history of and categorized in ranges certain recourse agreements or similar FHEFSSA, Congress indicated its intent proprietary loan-level data elements to arrangements, GSEs rarely divest that the GSE public use data base is to protect proprietary GSE information. themselves of credit risk associated with supplement HMDA data.53 The purpose HUD released the recoded data elements mortgage purchases in clear-cut of the GSE data base is to assist the and the data elements that were percentages of risk. Some arrangements public, including mortgage lenders, identified as non-proprietary have time or dollar limits. The relative planners, researchers, and housing information to the public. risk assumed by the GSE on one loan industry groups, as well as HUD and In the fall of 1996, the Department compared to another relates not only to other government agencies, in studying released the first publicly available GSE the relative risk management the GSEs’ mortgage activities and the loan level data base, containing non- characteristics (including mortgage flow of mortgage credit and capital into proprietary information on every insurance and recourse arrangements), the nation’s communities. At the same mortgage purchased by the GSEs from but also to loan-to-value ratios, time, section 1326 of FHEFSSA protects 1993 to 1995. Subsequently, HUD has multifamily debt coverage ratios, from public access and disclosure, made the 1996, 1997, 1998, and 1999 interest rate risk, and many other proprietary data and information that databases available to the public. In parameters. Moreover, whether there is the GSEs submit to the Department and addition, HUD issued an order subsequent securitization or requires HUD to protect such data or determining that certain aggregations of resecuritization of a GSE interest also information by order or regulation. data that may otherwise be proprietary bears upon the degree of credit risk To comply with FHEFSSA, HUD at the loan level is not proprietary at an retained by the GSE in a transaction. established a public use data base to aggregated level. Through that order, it Any determination about discounting collect and make available to the public, is possible for HUD to make available to goals credit based on the level of risk loan-level data on the GSEs’ single the public specific tables of borne by a GSE in the transaction also family and multifamily mortgage nonproprietary information about the must take into account consistency with purchases. In Appendix F to the GSEs’ activities and housing goal the GSEs’ Charter Acts which require December 1, 1995 final rule, the performance. the GSEs to obtain mortgage insurance Department specified the structure of After consideration of the current or its equivalent for certain single family the GSE public use data base and structure of the GSE public use data mortgages, and must consider the identified the data to be withheld from base, the Department proposed several financial safety and soundness public use. changes to its classifications of the requirements under FHEFSSA as well as The single family data was to be GSEs’ mortgage data. Those proposed its housing goals provisions. disclosed in three separate files—a changes were either technical in nature Accordingly, HUD has determined, Census Tract File (with geographic or would, by reclassifying certain data based on its analysis of available identifiers down to the census tract from proprietary to non-proprietary, information on the GSEs’ credit level), a National File A (with mortgage- make available to the public the same enhanced transactions, comments and level data on owner-occupied 1-unit data from the GSEs that is made other input received on the proposed properties), and a National File B (with available by primary lenders under the rule, as well as its analysis of the law, unit-level data on all single family Home Mortgage Disclosure Act (HMDA). the complexity of these issues requires properties). The national files do not HUD received comments from both additional evaluations before changes have geographic indicators. The GSEs as well as trade organizations, are made to these rules. These multifamily data was to be disclosed in advocacy groups, researchers, and evaluations will further assess the two separate files ‘‘a Census Tract File lenders on this issue. Comments were extent to which the GSEs’ use of credit and a National File. Each file consists of almost evenly divided between those enhancements add value and liquidity two parts, one part containing mortgage groups approving of increased data to the marketplace, especially for loan level data and the other containing disclosure at the loan-level and those affordable housing lending, as well as unit level data for all multifamily that opposed the proposals, mostly out the impact their use has on the GSEs’ properties. For each file, Appendix F of concern for protecting the privacy of mandate to play a leadership role in the identified data elements that were borrowers’ and lenders’ business mortgage markets. To assist its considered proprietary and those that strategies. Both GSEs were strongly evaluations, HUD is undertaking further were not proprietary and available to opposed to increased disclosure, citing review and analysis on credit the public, and specified further that competitive issues resulting from the enhancements. Topics being covered in certain proprietary elements would be release of what each GSE considered to this review include the GSEs’ use of recoded or categorized into ranges to be proprietary, confidential business credit enhancements provided by seller- protect the proprietary information and information. Fannie Mae and Freddie servicers, third party vendors, and to permit the release of non-proprietary Mac expressed general concern that
VerDate 112000 18:02 Oct 30, 2000 Jkt 194001 PO 00000 Frm 00039 Fmt 4701 Sfmt 4700 E:\FR\FM\31OCR2.SGM pfrm08 PsN: 31OCR2 65082 Federal Register / Vol. 65, No. 211 / Tuesday, October 31, 2000 / Rules and Regulations recoding certain loan-level data as non- preserve and protect such data from accordance with the Department’s proprietary at either the census tract or public disclosure. Also, any implication regulations at §§ 81.72 through 81.74. national file level would reveal that additional disclosure of GSE data 20. Other Considerations information about lender relationships, might in fact facilitate a further loss of pricing arrangements, and management borrower privacy or encourage a. Data Reporting. Many of the of credit and interest rate risks. Fannie predatory lending practices are issues changes included in the final rule Mae also took issue with HUD’s efforts that HUD believes warrant especially involve changes in data reporting to conform data available in the GSE close scrutiny. requirements. The Department will not public use data base to HMDA data for In recognition of its responsibilities to establish those requirements in this research purposes, contending that both proceed with the utmost caution in final rule, but rather will establish them databases are fundamentally different releasing data, HUD follows a rigorous in accordance with FHEFSSA and 24 and cannot be readily reconciled. six-factor determination process in CFR part 81, considering the proprietary Lenders expressed a similar concern considering whether to accord concerns of the GSEs and other about the potential for additional public proprietary treatment to mortgage data. considerations in the public interest. data to reveal business strategies, For every data element under Specific areas where additional data commenting that the more data HUD consideration for non-proprietary will need to be collected include but are makes available through the public use treatment, HUD evaluates: not limited to indicators for mortgages data base, the more likely that other (1) The type of data or information located in tribal lands, identification of lenders would be able to discern the involved and the nature of the adverse units with estimated affordability data competition’s lending strategies. consequences to the GSE, financial or mortgage loans receiving bonus points Some trade organizations viewed the otherwise, that could result from and the temporary adjustment factor, proposed changes as potentially harmful disclosure; and mortgages relating to Section 8 to consumers. Their viewpoints were (2) The existence and applicability of assistance contracts. representative of similar concerns any prior determinations by HUD, any One area in particular that will expressed by lenders and the GSEs. One other Federal agency, or a court, require additional data elements is high organization wrote that exposing more concerning similar data or information; cost mortgage loans. In order to monitor detailed information about the (3) The measures taken by the GSE to and enforce the restrictions included in consumer to the general public will only protect the confidentiality of the this final rule, new data and reporting enhance the ability of sellers of credit to mortgage data and similar data before requirements may be required, as take unfair advantage of the consumer, and after its submission to the Secretary; appropriate. The Department notes that particularly the urban and minority (4) The extent to which the mortgage the HUD/Treasury report recommended consumer.’’ Another urged that HUD be data is publicly available including that the Federal Reserve amend its ‘‘sensitive to emerging technology when whether the data or information is regulations to require the collection of deciding what data elements to make available from other entities, from local similar data items under the Home public on the [public use data base] government offices or records, including Mortgage Disclosure Act (HMDA), files. Consumer financial and credit deeds, recorded mortgages, and similar including information on loan price information privacy must be a documents, or from publicly available (APR and cost of credit) and borrower paramount concern to the Department.’’ data bases; debt-to-income ratio for HOEPA loans. If A third organization strongly opposed (5) The difficulty that a competitor, such recommendations are releasing additional data out of concern including a seller/servicer, would face implemented, it may affect the data for borrowers’ privacy and ‘‘potential in obtaining or compiling the mortgage reporting required under this rule. exposure of association members’ data; and b. Comments Regarding Regional confidential business information.’’ (6) Such additional facts and legal and Issues. Several commenters offered Another commenter, however, other authorities as the Secretary may comments on the need to inform various supported increased disclosure of data, consider appropriate, including the communities and regions around the contending that access to more data extent to which particular mortgage country of the GSEs’ affordable housing should lead to a better understanding of data, when considered together with goal performance in those areas. the affordable housing market and to other information, could reveal Separate from this rulemaking, as reduced costs for those operating in the proprietary information. described above, HUD has recently market. Section 1326 of FHEFSSA and § 81.75 taken steps to make more MSA level Housing and community of the regulations provide that the information, on an aggregated basis, organizations generally viewed HUD’s Department may, by regulation or order, about the GSEs mortgage purchases proposed changes as a series of issue a list of information that shall be available to the public. HUD encourages improvements that would make the accorded proprietary treatment. HUD the residents of local communities and public use data base more compatible utilized the proposed rule to suggest regions of the country to increase their with HMDA data and, therefore, more changes to the proprietary treatment of knowledge of the roles the GSEs’ play in valuable as a research tool. One certain GSE data. The comments their areas and, toward that end, HUD commenter also supported bringing the received in response offered useful will make available information to build public use data base into conformity insights into concerns of many different understanding of the GSEs’ activities. with HMDA stating that comparisons organizations including the GSEs’ c. Technical Correction. Section between the two databases are respecting the proposed changes. 81.76(d) describes the protection of GSE ‘‘extremely important’’ in evaluating the Based on the comments received, information by HUD officers and GSEs’’ mandate to lead the primary HUD is not making a determination on employees. That section has cited market. this matter as part of this rulemaking. HUD’s Standards of Conduct regulations HUD recognizes the potential harm HUD will issue a decision on which in 24 CFR part 0. HUD’s Standards of that the release of truly proprietary data data elements will be accorded Conduct regulations in part 0 were, could have on the GSEs as well as their proprietary and non-proprietary however, largely superseded by new lending partners and is cognizant of its treatment by separate order following financial disclosure regulations codified responsibilities under FHEFSSA to publication of this final rule in in 5 CFR part 2634, new executive
VerDate 112000 18:02 Oct 30, 2000 Jkt 194001 PO 00000 Frm 00040 Fmt 4701 Sfmt 4700 E:\FR\FM\31OCR2.SGM pfrm08 PsN: 31OCR2 Federal Register / Vol. 65, No. 211 / Tuesday, October 31, 2000 / Rules and Regulations 65083 branch-wide Standards of Conduct construction materials, manufactured Federal Home Loan Mortgage Corporation codified in 5 CFR part 2635, and housing, or occupancy. Therefore, this (1996), page 3. supplemental HUD-specific Standards final rule is categorically excluded from 6. S. Rep. No. 282, 102d Cong., 2d Sess. 34 of Conduct codified in 5 CFR part 7501. (1992). the requirements of the National 7. FFIEC Press Release, July 29, 1999. Consequently, in 1996, HUD removed Environmental Policy Act. 8. Section 802(ee) of the Housing and the current text of 24 CFR part 0 and Regulatory Flexibility Act Urban Development Act of 1968 (Pub. L. 90– replaced it with a single section (§ 0.1) 448, approved August 1, 1968; 82 Stat. 476, that provides cross-references to those The Secretary, in accordance with the 541). provisions. (See final rules published in Regulatory Flexibility Act (5 U.S.C. 9. See sec. 731 of the Financial Institutions the Federal Register on April 5, 1996 605(b)), has reviewed this rule before Reform, Recovery, and Enforcement Act of 1989 (FIRREA) (Pub. L. 101–73, approved (61 Fed. Reg. 15,350), and on July 9, publication and by approving it certifies 1996 (61 Fed. Reg. 36,246).) In order to August 9, 1989), which amended the Freddie that this rule would not have a Mac Act. correct § 81.76(d), this final rule will significant economic impact on a 10. See 24 CFR 81.16(d) and 81.17 (1992 revise the references to those provisions substantial number of small entities. codification). accordingly. This final regulation is applicable only 11. Sec. 1321. 12. See generally secs. 1331–34. III. Findings and Certifications to the GSEs, which are not small entities for purposes of the Regulatory 13. Secs. 1332(b), 1333(a)(2), 1334(b). Executive Order 12866 14. 65 FR 12632–12816 Flexibility Act, and, thus, does not have 15. S. Rep. No. 282, 102d Cong., 2d Sess. The Office of Management and Budget a significant economic impact on a 34 (1992) at 35. (OMB) reviewed this final rule under substantial number of small entities. 16. Rental Housing Assistance—The Executive Order 12866, Regulatory Worsening Crisis: A Report to Congress on Executive Order 13132, Federalism Planning and Review, which the Worst Case Housing Needs, Department of President issued on September 30, 1993. Executive Order 13132 (‘‘Federalism’’) Housing and Urban Development, Office of This rule was determined economically prohibits, to the extent practicable and Policy Development and Research, (March significant under E.O. 12866. Any 2000). permitted by law, an agency from 17. Standard & Poor’s DRI Review of the changes made to this final rule promulgating a regulation that has U.S. Economy. (June 2000), p. 57. subsequent to its submission to OMB federalism implications and either 18. See, e.g., S. Rep. at 34. are identified in the docket file, which imposes substantial direct compliance 19. S. Rep. at 34. is available for public inspection costs on State and local governments 20. 12 U.S.C. 2901 et seq. between 7:30 a.m. and 5:30 p.m. and is not required by statute, or 21. See section 1335(3)(B). weekdays in the Office of the Rules preempts State law, unless the relevant 22. The following discussion is based on analysis of conventional, conforming Docket Clerk, Office of General Counsel, requirements of section 6 of the Room 10276, Department of Housing mortgage loans which were originated in Executive Order are met. This final rule 1998, and which may have been acquired by and Urban Development, 451 Seventh does not have federalism implications the GSEs in 1998 or 1999. Appendix A Street, SW., Washington, DC. The and does not impose substantial direct contains further details regarding GSE Economic Analysis prepared for this compliance costs on State and local acquisitions of 1997 originations as well. rule is also available for public governments or preempt State law HUD will analyze GSE purchases in relation inspection in the Office of the Rules within the meaning of the Executive to the 1999 mortgage market once HUD has Docket Clerk. Order. the opportunity to analyze 1999 HMDA data for metropolitan areas. Congressional Review of Major Final Unfunded Mandates Reform Act 23. Totals do not add due to rounding. Rules 24. This percentage differs from the GSEs’ This rule is a ‘‘major rule’’ as defined Title II of the Unfunded Mandates 19 percent market share for rental units in in Chapter 8 of 5 U.S.C. The rule has Reform Act of 1995 (UMRA) establishes single family rental properties financed in requirements for Federal agencies to 1998 chiefly because the 41 percent figure been submitted for Congressional reported here includes owner-occupied units review in accordance with this chapter. assess the effects of their regulatory actions on State, local, and tribal in 2–4 unit properties which also have rental Paperwork Reduction Act governments, and the private sector. units. 25. A recent Treasury-sponsored report on HUD’s collection of information on This final rule would not impose any CRA found that banks and thrifts increased the GSEs’ activities has been reviewed Federal mandates on any State, local, or the share of their mortgage originations to and authorized by the Office of tribal governments, or on the private low-income borrowers and communities Management and Budget (OMB) under sector, within the meaning of the from 25 percent in 1993 to 28 percent in the Paperwork Reduction Act of 1995 UMRA. 1998. See Robert E. Litan, Nicolas P. (44 U.S.C. 3501–3520), as implemented Retsinas, Eric S. Belsky, and Susan White Endnotes to Preamble Haag, The Community Reinvestment Act by OMB in regulations at 5 CFR part After Financial Modernization: A Baseline 1320. The OMB control number is 1. See sec. 301 of the Federal National Project, U.S. Department of Treasury, April 2502–0514. Mortgage Association Charter Act (Fannie 25, 2000. Mae Charter Act) (12 U.S.C. 1716); sec. 301(b) Environmental Impact 26. African American borrowers accounted of the Federal Home Loan Mortgage for 6.5 percent of all conforming home loans, In accordance with 24 CFR 50.19(c)(1) Corporation Act (Freddie Mac Act) (12 U.S.C. including FHA and VA loans, in of HUD’s regulations, this final rule 1451 note). metropolitan areas in 1998. Further would not direct, provide for assistance 2. Secs. 306(c)(2) of the Freddie Mac Act information on the GSEs’ purchases of or loan and mortgage insurance for, or and 304(c) of the Fannie Mae Charter Act. mortgage loans to minority borrowers may be otherwise govern or regulate real 3. Secs. 306(g) of the Freddie Mac Act and found in Appendix A. 304(d) of the Fannie Mae Charter Act. property acquisition, disposition, lease, 27. Hispanic borrowers were 6.7 percent of 4. Secs. 303(e) of the Freddie Mac Act and all conforming metropolitan area home loans, rehabilitation, alteration, demolition, or 309(c)(2) of the Fannie Mae Charter Act. including FHA and VA loans, in 1998. new construction; nor would it 5. U.S. Department of Treasury, Further information on the GSEs’ purchases establish, revise, or provide for Government Sponsorship of the Federal of mortgage loans to minority borrowers may standards for construction or National Mortgage Association and the be found in Appendix A.
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28. The low- and moderate-income market significantly to Freddie Mac’s performance PART 81ÐTHE SECRETARY OF HUD'S share is the estimated proportion of newly on the Special Affordable Goal. In 1999, 43 REGULATION OF THE FEDERAL mortgaged units in the market serving low- percent of units backing Freddie Mac’s NATIONAL MORTGAGE ASSOCIATION and moderate-income families. The two other multifamily transactions met the Special (FANNIE MAE) AND THE FEDERAL shares are similarly defined. HUD’s Affordable Goal, representing 22% of units conservative range of estimates (such as 50– counted toward the Goal. Multifamily units HOME LOAN MORTGAGE 55 percent) reflects uncertainty about future were eight per cent of Freddie Mac’s total CORPORATION (FREDDIE MAC) market conditions. purchase volume in 1999. 1. The authority citation for 24 CFR 29. Appendix D explains the specific 38. U.S. House of Representatives, part 81 continues to read as follows: reasons for the 1995–98 market estimates for Congressional Record. (October 13, 1999), p. the low-mode and special affordable housing H10014. Authority: 12 U.S.C. 1451 et seq., 1716– goals are higher than the upper end of HUD’s 39. 15 U.S.C. 1601 note; Title I, Subtitle B 1723h, and 4501–4641; 42 U.S.C. 3535(d) and market projections for the years 2001–2003. of the Riegle Community Development and 3601–3619. Based on average 1993–1998 experience, Regulatory Improvement Act of 1994, Pub. L. 2. Section 81.2, is amended by HUD’s projection model assumes that 103–325 (Sept. 23, 1994); 108 Stat. 2190–98. revising the definitions of ‘‘Median refinance borrowers have higher incomes 40. Currently, HOEPA covers refinancings income’’ ‘‘Metropolitan area,’’ and than home purchase borrowers; however, of mortgages. 15 U.S.C. 1601(aa)(1). ‘‘Underserved area,’’ by adding a new between 1995 and 1997, refinance borrowers 41. As mentioned above, HOEPA grants the had lower incomes. On average, the 1995–98 Federal Reserve Board authority to lower the paragraph (7) to the definition of period also exhibited a slightly higher APR trigger to 8 percentage points over ‘‘Refinancing,’’ and by adding new percentage of rental units financed than comparable treasuries (or to raise it to 12 definitions for ‘‘HOEPA mortgage,’’ assumed in HUD’s projection model. See percentage points above), 15 U.S.C. ‘‘Mortgages contrary to good lending Appendix D for other reasons the 1995–1998 1602(aa)(2), and to broaden the class of costs practices,’’ and ‘‘Mortgages with average market estimates are higher than counted toward the fees trigger, 15 U.S.C. unacceptable terms or conditions or those projected for the years 2001–2003. 1602(aa)(4)(D). resulting from unacceptable practices,’’ 30. PriceWaterhouse-Coopers, ‘‘The Impact 42. 12 U.S.C. 4563(b)(1)(B). to read as follows: of Economic Conditions on the Size and the 43. Id. Composition of the Affordable Housing 44. CRA regulations were published as a § 81.2 Definitions. Market’’ (April 5, 2000). joint final rule on May 4, 1995. The * * * * * 31. In 1998, PWC estimates the size of the regulation is codified at 12 CFR Part 25, CFR ‘‘HOEPA mortgage’’ means a mortgage single family mortgage market at $1.5 trillion. Parts 228 and 203, 12 CFR Part 345, and 12 This estimate is identical to the widely used for which the annual percentage rate (as CFR Part 563e for the Office of the calculated in accordance with the estimate by the Mortgage Bankers Comptroller of the Currency, the Federal Association for the entire single family Reserve Board, the Federal Deposit Insurance relevant provisions of section 107 of the mortgage market, including FHA and jumbo Corporation, and the Office of Thrift Home Ownership Equity Protection Act loans. Supervision, respectively. (HOEPA) (15 U.S.C. 1606)) exceeds the 32. The figures presented for goal 45. Pub. L. 106–102; approved November threshold described in section performance are based on HUD analysis of 12, 1999. 103(aa)(1)(A) of HOEPA (15 U.S.C. the GSEs’ loan level data. Some results differ 46. See S. Rep. No. 282, 102nd Cong., 2nd 1602(aa)(1)(A)), or for which the total marginally from the corresponding figures Sess. 39 (1992); H.R. Rept. 206, 102nd Cong., points and fees payable by the borrower presented by Fannie Mae and Freddie Mac in 1st Sess. 59 (1991) their respective Annual Housing Activities exceed the threshold described in 47. Ibid. section 103(aa)(1)(B) of HOEPA (15 Reports (AHARs) to HUD, reflecting 48. 24 CFR parts 401 and 402, Multifamily differences in application of counting rules. Housing Mortgage and Housing Assistance U.S.C. 1602(aa)(1)(B)), as those 33. The figures presented for goal Restructuring Program (Mark-to-Market): thresholds may be increased or performance are based on HUD’s analysis of Final Rule, March 22, 2000. decreased by the Federal Reserve Board the GSEs’ loan level data. Some results differ 49. The 1992 House committee report on or by Congress, unless the GSEs are marginally from the corresponding figures the bill that later became FHEFSSA otherwise notified in writing by HUD. presented by the GSEs in their AHARs, emphasizes that ‘‘the goals included in this Notwithstanding the exclusions in reflecting differences in application of legislation are specifically not to include section 103(aa)(1) of HOEPA, for counting rules. purchases of equity for low-income housing 34. GSE to market ratio is calculated by purposes of this part, the term ‘‘HOEPA tax credits.’’ (House of Representatives mortgage’’ includes all types of dividing the performance of the respective Report 102–206, 102d Congress, 1st Session, GSE by the performance of the market. p. 60.) mortgages as defined in this section, 35. Freddie Mac-to-Market and Fannie 50. Handbook of Housing and including residential mortgage Mae-to-Market ratios cannot be calculated Development Law, 1996, p. 10–8 and IRC transactions as that term is defined in until 1999 HMDA data is available. Sec. 42 (i)(1). section 103(w) of HOEPA (15 U.S.C. 36. The figures presented for goal 51. 42 U.S.C. 1437f, sec. 514(e)(6) 1602(w)), but does not include reverse performance are based on HUD’s analysis of 52. Kenneth Temkin, Jennifer E. H. mortgages. the GSEs’ loan level data. Some results differ Johnston, and Charles Calhoun, An from the corresponding figures presented by * * * * * Assessment of Recent Innovations in the Median income means, with respect Fannie Mae in its AHARs by one to two Secondary Market for Low- and Moderate- percentage points. The difference largely Income Lending, report submitted to the U.S. to an area, the unadjusted median reflects differences between HUD and Fannie Department of Housing and Urban family income for the area as most Mae in application of counting rules relating Development (March 2000). recently determined and published by to counting of seasoned mortgage loans for 53. See S. Rep. No. 282, 102d Cong., 2d HUD. HUD will provide the GSEs purposes of this goal. Freddie Mac’s AHAR Sess. 39 (1992). annually with information specifying figures for this goal differ marginally from the how HUD’s published median family official figures presented above, also List of Subjects in 24 CFR Part 81 income estimates for metropolitan areas reflecting differences in application of are to be applied for the purposes of counting rates. Accounting, Federal Reserve System, 37. The percentage of Freddie Mac’s determining median family income. Mortgages, Reporting and recordkeeping Metropolitan area means a multifamily transactions counting toward the requirements, Securities. Special Affordable Goal was unusually low metropolitan statistical area (‘‘MSA’’), or in 1999 relative to previous years, but the Accordingly, 24 CFR part 81 is primary metropolitan statistical area multifamily sector still contributed amended as follows: (‘‘PMSA’’), or a portion of such an area
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(C) The cost of mortgage insurance or area,’’ a census tract, a Federal or State * * * * * credit-risk price adjustments; American Indian reservation or tribal or ‘‘Mortgages contrary to good lending (D) The costs of title, hazard, and individual trust land, or the balance of practices’’ means a mortgage or a group flood insurance policies; a census tract excluding the area within or category of mortgages entered into by (E) State and local transfer taxes or any Federal or State American Indian a lender and purchased by a GSE where fees; reservation or tribal or individual trust it can be shown that a lender engaged (F) Escrow deposits for the future land, having: in a practice of failing to: payment of taxes and insurance (i) A median income at or below 120 (1) Report monthly on borrowers’ premiums; and percent of the median income of the repayment history to credit repositories (G) Other miscellaneous fees and metropolitan area and a minority on the status of each GSE loan that a charges that, in total, do not exceed 0.25 population of 30 percent or greater; or lender is servicing; percent of the loan amount. (ii) A median income at or below 90 (2) Offer mortgage applicants products (2) Prepayment penalties, except percent of median income of the for which they qualify, but rather steer where: metropolitan area. applicants to high cost products that are (i) The mortgage provides some (2) For purposes of the definition of designed for less credit worthy benefits to the borrower (e.g., such as ‘‘Rural area’’: borrowers. Similarly, for consumers rate or fee reduction for accepting the (i) In areas other than New England, who seek financing through a lender’s prepayment premium); a whole county, a Federal or State higher-priced subprime lending (ii) The borrower is offered the choice American Indian reservation or tribal or channel, lenders should not fail to offer of another mortgage that does not individual trust land, or the balance of or direct such consumers toward the contain payment of such a premium; a county excluding the area within any lender’s standard mortgage line if they (iii) The terms of the mortgage Federal or State American Indian are able to qualify for one of the provision containing the prepayment reservation or tribal or individual trust standard products; penalty are adequately disclosed to the land, having: (3) Comply with fair lending borrower; and (A) A median income at or below 120 requirements; or (iv) The prepayment penalty is not percent of the greater of the State non- (4) Engage in other good lending charged when the mortgage debit is metropolitan median income or the practices that are: accelerated as the result of the nationwide non-metropolitan median (i) Identified in writing by a GSE as borrower’s default in making his or her income and a minority population of 30 good lending practices for inclusion in mortgage payments. percent or greater; or (3) The sale or financing of prepaid this definition; and (B) A median income at or below 95 single-premium credit life insurance (ii) Determined by the Secretary to percent of the greater of the State non- products in connection with the constitute good lending practices. metropolitan median income or origination of the mortgage; ‘‘Mortgages with unacceptable terms nationwide non-metropolitan median (4) Evidence that the lender did not or conditions or resulting from income. adequately consider the borrower’s unacceptable practices’’ means a (ii) In New England, a whole county ability to make payments, i.e., mortgages mortgage or a group or category of having the characteristics in paragraphs that are originated with underwriting mortgages with one or more of the (2)(i)(A) or (2)(i)(B) of this definition; a techniques that focus on the borrower’s following terms or conditions: Federal or State American Indian equity in the home, and do not give full (1) Excessive fees, where the total reservation or tribal or individual trust consideration of the borrower’s income points and fees charged to a borrower land, having the characteristics in and other obligations. Ability to repay exceed the greater of 5 percent of the paragraphs (2)(i)(A) or (2)(i)(B) of this must be determined and must be based loan amount or a maximum dollar definition; or the balance of a county, upon relating the borrower’s income, amount of $1000, or an alternative excluding any portion that is within any assets, and liabilities to the mortgage amount requested by a GSE and Federal or State American Indian payments; or determined by the Secretary as reservation or tribal or individual trust (5) Other terms or conditions that are: appropriate for small mortgages. land, or metropolitan area where the (i) Identified in writing by a GSE as (i) For purposes of this definition, remainder has the characteristics in unacceptable terms or conditions or points and fees include: paragraphs (2)(i)(A) or (2)(i)(B) of this resulting from unacceptable practices (A) Origination fees; definition. for inclusion in this definition; and (B) Underwriting fees; (3) Any Federal or State American (ii) Determined by the Secretary as an (C) Broker fees; Indian reservation or tribal or individual unacceptable term or condition of a (D) Finder’s fees; and trust land that includes land that is both mortgage for which goals credit should (E) Charges that the lender imposes as within and outside of a metropolitan not be received. a condition of making the loan, whether area and that is designated as an they are paid to the lender or a third * * * * * underserved area by HUD. In such party. Refinancing means * * * cases, HUD will notify the GSEs as to (ii) For purposes of this definition, * * * * * applicability of other definitions and points and fees do not include: (7) A conversion of a balloon counting conventions. (A) Bona fide discount points; mortgage note on a single family * * * * * (B) Fees paid for actual services property to a fully amortizing mortgage 3. Section 81.12 is amended as rendered in connection with the note where the GSE already owns or has follows: origination of the mortgage, such as an interest in the balloon note at the a. Paragraph (b) is amended by attorneys’ fees, notary’s fees, and fees time of the conversion. revising the last sentence; and paid for property appraisals, credit * * * * * b. Paragraph (c) is revised, to read as reports, surveys, title examinations and Underserved area means: follows:
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§ 81.12 Low- and Moderate-Income a. Paragraph (b) is amended by affordable to especially low-income Housing Goal. revising the last sentence; families; or * * * * * b. Paragraph (c) is revised; * * * * * (b) Factors. * * * A statement c. Paragraph (d) is amended by (e) * * * documenting HUD’s considerations and revising paragraph (d)(1)(i); (2) Mortgages insured under HUD’s findings with respect to these factors, d. Paragraph (e) is amended by Home Equity Conversion Mortgage entitled ‘‘Departmental Considerations revising paragraphs (e)(2), (e)(3), and (‘‘HECM’’) Insurance Program, 12 U.S.C. to Establish the Low-and Moderate- (e)(4); 1715 z–20; mortgages guaranteed under Income Housing Goal,’’ was published e. Paragraph (f) is redesignated as the Rural Housing Service’s Single in the Federal Register on October 31, paragraph (g) and the last sentence of Family Housing Guaranteed Loan 2000. the newly redesignated paragraph (g) is Program, 42 U.S.C. 1472; mortgages on (c) Goals. The annual goals for each revised; and properties on tribal lands insured under GSE’s purchases of mortgages on FHA’s Section 248 program, 12 U.S.C. housing for low-and moderate-income f. A new paragraph (f) is added; to read as follows: 1715 z–13, HUD’s Section 184 program, families are: 12 U.S.C. 1515 z–13a, or Title VI of the (1) For each of the years 2001–2003, § 81.14 Special Affordable Housing Goal. Native American Housing Assistance 50 percent of the total number of * * * * * and Self-Determination Act of 1996, 25 dwelling units financed by that GSE’s U.S.C. 4191–4195; meet the mortgage purchases in each of those (b) * * * A statement documenting HUD’s considerations and findings with requirements of 12 U.S.C. years unless otherwise adjusted by HUD 4563(b)(1)(A)(i) and (ii). in accordance with FHEFSSA; and respect to these factors, entitled ‘‘Departmental Considerations to (3) HUD will give full credit toward (2) For the year 2004 and thereafter achievement of the Special Affordable HUD shall establish annual goals. Establish the Special Affordable Housing Goal,’’ was published in the Housing Goal for the activities in 12 Pending establishment of goals for the U.S.C. 4563(b)(1)(A), provided the GSE year 2004 and thereafter, the annual Federal Register on October 31, 2000. (c) Goals. The annual goals for each submits documentation to HUD that goal for each of those years shall be 50 supports eligibility under 12 U.S.C. percent of the total number of dwelling GSE’s purchases of mortgages on rental and owner-occupied housing meeting 4563(b)(1)(A) for HUD’s approval. units financed by that GSE’s mortgage (4)(i) For purposes of determining purchases in each of those years. the then-existing, unaddressed needs of and affordable to low-income families in whether a seller meets the requirement 4. Section 81.13 is amended as low-income areas and very low-income in 12 U.S.C. 4563(b)(1)(B), a seller must follows: families are: currently operate on its own or actively a. Paragraph (b) is amended by participate in an on-going, discernible, revising the last sentence; and (1) For each of the years 2001, 2002, active, and verifiable program directly b. Paragraph (c) is revised, to read as and 2003, 20 percent of the total number targeted at the origination of new follows: of dwelling units financed by that GSE’s mortgage loans that qualify under the mortgage purchases in each of those Special Affordable Housing Goal. § 81.13 Central Cities, Rural Areas, and years unless otherwise adjusted by HUD Other Underserved Areas Housing Goal. (ii) A seller’s activities must evidence in accordance with FHEFSSA. The goal a current intention or plan to reinvest * * * * * for each year shall include mortgage the proceeds of the sale into mortgages (b) Factors. * * * A statement purchases financing dwelling units in qualifying under the Special Affordable documenting HUD’s considerations and multifamily housing totaling not less Housing Goal, with a current findings with respect to these factors, than 1.0 percent of the average annual commitment of resources on the part of entitled ‘‘Departmental Considerations dollar volume of combined (single the seller for this purpose. to Establish the Central Cities, Rural family and multifamily) mortgages (iii) A seller’s actions must evidence Areas, and Other Underserved Areas purchased by the respective GSE in willingness to buy qualifying loans Housing Goal,’’ was published in the 1997, 1998 and 1999, unless otherwise when these loans become available in Federal Register on October 31, 2000. adjusted by HUD in accordance with the market as part of active, on-going, (c) Goals. The annual goals for each FHEFSSA; and sustainable efforts to ensure that GSE’s purchases of mortgages on (2) For the year 2004 and thereafter additional loans that meet the goal are housing located in central cities, rural HUD shall establish annual goals. originated. areas, and other underserved areas are: Pending establishment of goals for the (iv) Actively participating in such a (1) For each of the years 2001–2003, year 2004 and thereafter, the annual program includes purchasing qualifying 31 percent of the total number of goal for each of those years shall be 20 loans from a correspondent originator, dwelling units financed by that GSE’s percent of the total number of dwelling including a lender or qualified housing mortgage purchases in each of those units financed by that GSE’s mortgage group, that operates an on-going years unless otherwise adjusted by HUD purchases in each of those years. The program resulting in the origination of in accordance with FHEFSSA; and goal for each such year shall include loans that meet the requirements of the (2) For the year 2004 and thereafter mortgage purchases financing dwelling goal, has a history of delivering, and HUD shall establish annual goals. units in multifamily housing totaling currently delivers qualifying loans to Pending establishment of goals for the not less than 1.0 percent of the annual the seller. year 2004 and thereafter, the annual average dollar volume of combined (v) The GSE must verify and monitor goal for each of those years shall be 31 (single family and multifamily) that the seller meets the requirements in percent of the total number of dwelling mortgages purchased by the respective paragraphs (e)(4)(i) through (e)(4)(iv) of units financed by that GSE’s mortgage GSE in the years 1997, 1998 and 1999. this section and develop any necessary purchases in each of those years. (d) * * * mechanisms to ensure compliance with * * * * * (1) * * * the requirements, except as provided in 5. Section 81.14 is amended as (i) 20 percent of the dwelling units in paragraph (e)(4)(vi) and (vii) of this follows: the particular multifamily property are section.
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(vi) Where a seller’s primary business of this paragraph (e)(4) and of 12 U.S.C. very low, low or moderate income, the is originating mortgages on housing that 4563(b)(1)(B). income of the mortgagors is compared to qualifies under this Special Affordable * * * * * the median income for the area at the Housing Goal such seller is presumed to (f) Partial credit activities. Mortgages time of the mortgage application, using meet the requirements in paragraphs insured under HUD’s Title I program, the appropriate percentage factor (e)(4)(i) through (e)(4)(iv) of this section. which includes property improvement provided under § 81.17. When the Sellers that are institutions that are: and manufactured home loans, shall income of the mortgagors is not (A) Regularly in the business of receive one-half credit toward the available to determine whether the mortgage lending; Special Affordable Housing Goal until purchase of a mortgage originated after (B) A BIF-insured or SAIF-insured such time as the Government National 1992 counts toward achievement of the depository institution; and Mortgage Association fully implements Low- and Moderate-Income Housing (C) Subject to, and has received at a program to purchase and securitize Goal or the Special Affordable Housing least a satisfactory performance Title I loans. Goal, a GSE may exclude single family evaluation rating for (g) No credit activities. *** For owner-occupied units located in census (1) At least the two most recent purposes of this paragraph (g), tracts with median income less than or consecutive examinations under, the ‘‘mortgages or mortgage-backed equal to area median income according Community Reinvestment Act, if the securities portfolios’’ includes to the most recent census from the lending institution has total assets in mortgages retained by Fannie Mae or denominator as well as the numerator, excess of $250 million; or Freddie Mac and mortgages utilized to up to a ceiling of one percent of the total (2) The most recent examination back mortgage-backed securities. number of single family owner-occupied dwelling units eligible to be counted under the Community Reinvestment Act 6. In § 81.15, paragraph (a) is revised, toward the respective housing goal in if the lending institutions which have paragraph (d) is amended by revising the current year. Mortgage purchases in total assets no more than $250 million the second sentence and by adding two excess of the ceiling will be included in are identified as sellers that are new sentences at the end, and paragraph presumed to have a primary business of the denominator and excluded from the (e) is amended by re-designating numerator if they are missing data. originating mortgages on housing that paragraph (e)(6) as (e)(7), and by adding qualifies under this Special Affordable (e) * * * a new paragraph (e)(6), to read as (6) Affordability data unavailable. (i) Housing Goal and, therefore, are follows: Multifamily. When information presumed to meet the requirements in § 81.15 General requirements. regarding the affordability of a rental paragraphs (e)(4)(i) through (e)(4)(iv) of unit is not available, a GSE’s (a) Calculating the numerator and this section. performance with respect to such a unit denominator. Performance under each (vii) Classes of institutions or may be evaluated with estimated organizations that are presumed have as of the housing goals shall be measured affordability information, so long as the their primary business originating using a fraction that is converted into a Department has reviewed and approved mortgages on housing that qualifies percentage. the data source and methodology for under this Special Affordable Housing (1) The numerator. The numerator of such estimated data. The use of Goal and, therefore. are presumed in each fraction is the number of dwelling estimated information to determine paragraphs (e)(4)(i) through (e)(4)(iv) of units financed by a GSE’s mortgage affordability may be used up to a this section to meet the requirements are purchases in a particular year that count maximum of five percent of the total as follows: State housing finance toward achievement of the housing goal. number of units backing the GSEs’ agencies; affordable housing loan (2) The denominator. The multifamily mortgage purchases in the consortia; Federally insured credit denominator of each fraction is, for all current year, adjusted for REMIC unions that are: mortgages purchased, the number of percentage and participation percent. (A) Members of the Federal Home dwelling units that could count toward When the application of affordability Loan Bank System and meet the first- achievement of the goal under data based on an approved market rental time homebuyer standard of the appropriate circumstances. The data source and methodology is not Community Support Program; or denominator shall not include GSE possible, and therefore the GSE lacks (B) Community development credit transactions or activities that are not sufficient information to determine unions; community development mortgages or mortgage purchases as whether the purchase of a mortgage financial institutions; public loan funds; defined by HUD or transactions that are originated after 1992 counts toward the or non-profit mortgage lenders. HUD specifically excluded as ineligible under achievement of the Low- and Moderate- may determine that additional classes of § 81.16(b). Income Housing Goal or the Special institutions or organizations are (3) Missing data or information. When Affordable Housing Goal, HUD will primarily engaged in the business of a GSE lacks sufficient data or exclude units in multifamily properties financing affordable housing mortgages information to determine whether the from the denominator as well as the for purposes of this presumption, and if, purchase of a mortgage originated after numerator in calculating performance so will notify the GSEs in writing. 1992 counts toward achievement of a under those goals. (viii) For purposes of paragraph (e)(4) particular housing goal, that mortgage (ii) Rental units in 1–4 unit single of this section, if the seller did not purchase shall be included in the family properties. When neither the originate the mortgage loans, but the denominator for that housing goal, income of prospective or actual tenants originator of the mortgage loans fulfills except under the circumstances of a rental unit in a 1–4 unit single the requirements of either paragraphs described in paragraphs (d) and (e)(6) of family property nor actual or average (e)(4)(i) through (e)(4)(iv), paragraph this section. rent data is available, and, therefore, the (e)(4)(vi) or paragraph (e)(4)(vii) of this * * * * * GSE lacks sufficient information to section; and the seller has held the loans (d) Counting owner-occupied units. determine whether the purchase of a for six months or less prior to selling the * * * To determine whether mortgagors mortgage originated after 1992 counts loans to the GSE, HUD will consider may be counted under a particular toward achievement of the Low- and that the seller has met the requirements family income level, i.e. especially low, Moderate-Income Housing Goal or the
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Special Affordable Housing Goal, a GSE eligibility and that HUD makes such a but which is not otherwise covered in may exclude rental units in 1–4 unit determination, or paragraph (c)(9)(i) of this section, the single family properties from the (iv) As provided in § 81.14(e)(3) GSE must submit the transaction to denominator as well as the numerator in * * * * * HUD for a determination on appropriate calculating performance under those (9) Single family mortgage goals counting treatment. goals. refinancings that result from conversion (10) Bonus points. The following * * * * * of balloon notes to fully amortizing transactions or activities, to the extent the units otherwise qualify for one or 7. Section 81.16 is amended as notes, if the GSE already owns or has an interest in the balloon note at the time more of the housing goals, will receive follows: bonus points toward the particular goal a. Paragraph (a) is revised; conversion occurs. (10) Any combination of factors in or goals, by receiving double weight in b. Paragraph (b) is amended by the numerator under a housing goal or revising paragraphs (b)(3) and (b)(9) and paragraphs (b)(1) through (9) of this section. goals and receiving single weight in the by adding a new paragraph (b)(10); denominator for the housing goal or c. Paragraph (c) is amended by adding (c) Other special rules. Subject to HUD’s primary determination of goals. Bonus points will not be awarded introductory text, by revising paragraph for the purposes of calculating (c)(6), and by adding new paragraphs whether a GSE shall receive full, partial, or no credit for a transaction toward performance under the special (c)(9), (c)(10), (c)(11), (c)(12), and (c)(13); affordable housing multifamily subgoal and achievement of any of the housing goals as provided in paragraph (a) of this described in § 81.14(c). All transactions d. A new paragraph (d) is added; to or activities meeting the following read as follows: section, the following supplemental rules apply: criteria will qualify for bonus points even if a unit is missing affordability § 81.16 Special counting requirements. * * * * * data and the missing affordability data (a) General. HUD shall determine (6) Seasoned mortgages. A GSE’s is treated consistent with whether a GSE shall receive full, partial, purchase of a seasoned mortgage shall § 81.15(e)(6)(i). Bonus points are or no credit for a transaction toward be treated as a mortgage purchase for available to the GSEs for purposes of achievement of any of the housing goals. purposes of these goals and shall be determining housing goal performance In this determination, HUD will included in the numerator, as for each year 2001 through 2003. appropriate, and the denominator in consider whether a transaction or Beginning in the year 2004, bonus calculating the GSE’s performance activity of the GSE is substantially points are not available for goal under the housing goals, except where equivalent to a mortgage purchase and performance counting purposes unless the GSE has already counted the either creates a new market or adds the Department extends their mortgage under a housing goal liquidity to an existing market, provided availability beyond December 31, 2003 however that such mortgage purchase applicable to 1993 or any subsequent for one or more types of activities and actually fulfills the GSE’s purposes and year, or where the Department notifies the GSEs by letter of that is in accordance with its Charter Act. determines, based upon a written determination. (b) * * * request by a GSE, that a seasoned (i) Small multifamily properties. HUD (3) Purchases of non-conventional mortgage or class of such mortgages will assign double weight in the mortgages except: should be excluded from the numerator numerator under a housing goal or goals (i) Where such mortgages are acquired and the denominator in order to further for each unit financed by GSE mortgage under a risk-sharing arrangement with a the purposes of the Special Affordable purchases in small multifamily Federal agency; Housing Goal. properties (5 to 50 physical units), (ii) Mortgages insured under HUD’s * * * * * provided, however, that bonus points Home Equity Conversion Mortgage (9) Expiring assistance contracts. In will not be awarded for properties that (‘‘HECM’’) insurance program, 12 U.S.C. accordance with 12 U.S.C. 4565(a)(5), are aggregated or disaggregated into 5– 1715z–20; mortgages guaranteed under actions that assist in maintaining the 50 unit financing packages for the the Rural Housing Service’s Single affordability of assisted units in eligible purpose of earning bonus points. Family Housing Guaranteed Loan multifamily housing projects with (ii) Units in 2–4 unit owner-occupied Program, 42 U.S.C. 1472; mortgages on expiring contracts shall receive credit properties. HUD will assign double properties on lands insured under under the housing goals as provided in weight in the numerator under the FHA’s Section 248 program, 12 U.S.C. paragraph (b)(3)(ii) and in accordance housing goals for each unit financed by 1715z–13, or HUD’s Section 184 with paragraphs (b) and (c)(1) through GSE mortgage purchases in 2- to 4-unit program, 12 U.S.C. 1515z–13a, or Title (c)(9) of this section. owner-occupied properties, to the extent VI of the Native American Housing (i) For restructured (modified) that the number of such units financed Assistance and Self-Determination Act multifamily mortgage loans with an by mortgage purchases are in excess of of 1996, 25 U.S.C. 4191–4195; and expiring assistance contract where a 60 percent of the yearly average number mortgages with expiring assistance GSE holds the loan in portfolio and of units qualifying for the respective contracts as defined at 42 U.S.C. 1737f; facilitates modification of loan terms housing goal during the five years (iii) Mortgages under other mortgage that results in lower debt service to the immediately preceding the year of programs involving Federal guarantees, project’s owner, the GSE shall receive mortgage purchase. insurance or other Federal obligation full credit under any of the housing (11) Temporary adjustment factor for where the Department determines in goals for which the units covered by the Freddie Mac. In determining Freddie writing that the financing needs mortgage otherwise qualify. Mac’s performance on the Low- and addressed by the particular mortgage (ii) Where a GSE undertakes more Moderate-Income Housing Goal and the program are not well served and that the than one action to assist a single project Special Affordable Housing Goal, HUD mortgage purchases under such program or where a GSE engages in an activity will count each qualifying unit in a should count under the housing goals, that it believes assists in maintaining property with more than 50 units as 1.2 provided the GSE submits the affordability of assisted units in units in calculating the numerator and documentation to HUD that supports eligible multifamily housing projects as one unit in calculating the
VerDate 112000 18:02 Oct 30, 2000 Jkt 194001 PO 00000 Frm 00046 Fmt 4701 Sfmt 4700 E:\FR\FM\31OCR2.SGM pfrm08 PsN: 31OCR2 Federal Register / Vol. 65, No. 211 / Tuesday, October 31, 2000 / Rules and Regulations 65089 denominator, for the respective housing Percentage of § 81.76 FOIA requests and protection of goal. HUD will apply this temporary Number of persons in family area median GSE information. adjustment factor for each year from income * * * * * 2001 through 2003; for the year 2004 3 ...... 45 (d) Protection of information by HUD and thereafter, this temporary 4 ...... 50 officers and employees. The Secretary adjustment factor will no longer apply. 5 or more ...... (*) will institute all reasonable safeguards (12) HOEPA mortgages and mortgages to protect data or information submitted with unacceptable terms and * 50% plus (4.0% multiplied by the number by or relating to either GSE, including, conditions. HOEPA mortgages and of persons in excess of 4). but not limited to, advising all HUD mortgages with unacceptable terms or 9. Section 81.18 is amended by officers and employees having access to conditions as defined in § 81.2 will not adding a new paragraph (d), to read as data or information submitted by or receive credit toward any of the three follows: relating to either GSE of the legal housing goals. (13) Mortgages contrary to good § 81.18 AffordabilityÐIncome level restrictions against unauthorized lending practices. The Secretary will definitionsÐfamily size not known (actual disclosure of such data or information monitor the practices and processes of or prospective tenants). under the executive branch-wide the GSEs to ensure that they are not * * * * * standards of ethical conduct, 5 CFR part purchasing loans that are contrary to (d) For especially-low-income, income 2635, and the Trade Secrets Act, 18 good lending practices as defined in of prospective tenants shall not exceed U.S.C. 1905. Officers and employees § 81.2. Based on the results of such the following percentages of area shall be advised of the penalties for monitoring, the Secretary may median income with adjustments, unauthorized disclosure, ranging from determine in accordance with paragraph depending on unit size: disciplinary action under 5 CFR part (d) of this section that mortgages or 2635 to criminal prosecution. Percentage of * * * * * categories of mortgages where a lender Unit size area median has not engaged in good lending income Dated: October 16, 2000. practices will not receive credit toward William C. Apgar, the three housing goals. Efficiency ...... 35 (d) HUD review of transactions. HUD 1 bedroom ...... 37.5 Assistant Secretary for Housing—Federal Housing Commissioner. will determine whether a class of 2 bedrooms ...... 45 transactions counts as a mortgage 3 bedrooms or more ...... (*) Note: The Following Appendices Will Not purchase under the housing goals. If a * 52% plus (6.0% multiplied by the number Appear in the Code of Federal Regulations. GSE seeks to have a class of transactions of bedrooms in excess of 3). Appendix A—Departmental counted under the housing goals that 10. In § 81.19, paragraph (d) is re- Considerations To Establish the Low- does not otherwise count under the designated as paragraph (e), a new and Moderate-Income Housing Goal rules in this part, the GSE may provide paragraph (d) is added and the second A. Introduction and Response to Comments HUD detailed information regarding the sentence of the newly re-designated transactions for evaluation and paragraph (e) is revised, to read as Sections 1 and 2 provide a basic determination by HUD in accordance follows: description of the rule process. Section 3 with this section. In making its discusses comments on the proposed rule determination, HUD may also request § 81.19 AffordabilityÐRent level and the Department’s responses. Section 4 and evaluate additional information definitionsÐtenant income is not known. discusses conclusions based on consideration from a GSE with regard to how the GSE * * * * * of the factors. believes the transactions should be (d) For especially-low-income, 1. Establishment of Goal counted. HUD will notify the GSE of its maximum affordable rents to count as In establishing the Low- and Moderate- determination regarding the extent to housing for especially-low-income Income Housing Goals for the Federal which the class of transactions may families shall not exceed the following National Mortgage Association (Fannie Mae) count under the goals. percentages of area median income with and the Federal Home Loan Mortgage 8. Section 81.17 is amended by adjustments, depending on unit size: Corporation (Freddie Mac), collectively adding a new paragraph (d), to read as referred to as the Government-Sponsored follows: Percentage of Enterprises (GSEs), Section 1332 of the Unit size area median Federal Housing Enterprises Financial Safety income § 81.17 AffordabilityÐIncome level and Soundness Act of 1992 (12 U.S.C. 4562) definitionsÐfamily size and income known Efficiency ...... 10.5 (FHEFSSA) requires the Secretary to (owner-occupied units, actual tenants, and consider: prospective tenants). 1 bedroom ...... 11.25 2 bedrooms ...... 13.5 1. National housing needs; * * * * * 3 bedrooms or more ...... (*) 2. Economic, housing, and demographic (d) Especially-low-income means, in conditions; the case of rental units, where the * 15.6% plus (1.8% multiplied by the number 3. The performance and effort of the of bedrooms in excess of 3). income of actual or prospective tenants enterprises toward achieving the Low- and is available, income not in excess of the * * * * * Moderate-Income Housing Goal in previous following percentages of area median (e) Missing Information. * * * If a years; income corresponding to the following GSE makes such efforts but cannot 4. The size of the conventional mortgage family sizes: obtain data on the number of bedrooms market serving low- and moderate-income in particular units, in making the families relative to the size of the overall Percentage of calculations on such units, the units conventional mortgage market; Number of persons in family area median shall be assumed to be efficiencies 5. The ability of the enterprises to lead the income industry in making mortgage credit available except as provided in § 81.15(e)(6)(i) for low- and moderate-income families; and 1 ...... 35 11. In § 81.76, paragraph (d) is revised 6. The need to maintain the sound 2 ...... 40 to read as follows: financial condition of the enterprises.
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2. Underlying Data GSEs, HUD’s range of market estimates did also discussed in Section E of this appendix, In considering the statutory factors in not include periods of adverse economic and which provides a detailed analysis of the establishing these goals, HUD relied on data affordability conditions, such as existed in GSEs’ goals-qualifying purchases in the from the 1995 American Housing Survey the early 1990s. HUD discusses the GSEs’ single-family-owner market, and in (AHS), the 1990 Census of Population and comments on economic volatility in Section Appendix D, which provides overall (both Housing, the 1991 Residential Finance B of Appendix D. As explained there, HUD’s single-family and multifamily) estimates of Survey (RFS), the 1995 Property Owners and ranges of market estimates for each of the the goals-qualifying shares of the market. In Managers Survey (POMS), other government housing goals are conservative, because they Appendix D, HUD excludes B&C loans from reports, reports submitted in accordance with allow for economic and interest rate its overall estimates of the market. In this the Home Mortgage Disclosure Act (HMDA), conditions much more adverse than existed appendix, HUD illustrates (to the extent and the GSEs. In order to measure during the mid- to late-1990s. HMDA data allow) the effects of excluding performance toward achieving the Low- and The discussion that follows summarizes B&C loans on the GSE-market comparisons, Moderate-Income Housing Goal in previous HUD’s responses to the GSEs’ comments on as well as the effects of excluding other loan years, HUD analyzed the loan-level data on the ‘‘leading the market’’ analysis that HUD categories such as manufactured housing all mortgages purchased by the GSEs for has conducted in Section E.2 of this loans. However, as explained below, HUD 1993–99 in accordance with the goal appendix—that section fully develops the does not believe that HMDA data for the counting provisions established by the various concepts referenced here. The final conventional conforming market should be Department in the December 1995 rule (24 two subsections, g and h, discuss additional adjusted to reflect the GSEs’ perceptions CFR part 81). issues that the GSEs raised about HUD’s about the characteristics of loans that are analysis of the factors in Appendix A. available for them to purchase. 3. Response to Comments b. Overview of Leading the Owner Market— c. Relevant Market for Single-Family Owner a. Introduction Quantitative Analysis Properties Fannie Mae and Freddie Mac provided The analysis of HMDA data in Section E.2 Both GSEs provided numerous comments detailed comments on HUD’s discussion of of this appendix indicates demonstrates that concerning the types of mortgages that HUD the factors for determining the goal levels in even though the GSEs have improved their should exclude from the definition of the Appendix A of the proposed rule. A major performance since 1993, they have lagged single-family owner market, both when HUD portion of their substantive comments depositories and others in the conventional is evaluating the GSEs’ performance relative concerned HUD’s analysis of the GSEs’ conforming market in funding affordable to the conventional conforming owner performance relative to the market. Both loans, both since 1993 and during the more market (i.e., determining whether the GSEs’ GSEs disagreed with HUD’s conclusions that recent 1996–98 period when the new housing lead or lag the market for single-family-owner they lag the conventional conforming market goals have been in effect. For example, mortgages) and when HUD is calculating the in funding mortgages for the goals-qualifying underserved areas accounted for 22.9 (19.9) overall market shares for each housing goal segments (low-mod borrowers, special percent of Fannie Mae’s (Freddie Mac’s) (as described in Appendix D). Fannie Mae affordable borrowers, and underserved purchases of home loans between 1996 and stated that it ‘‘can only purchase or securitize neighborhoods) of the single-family owner 1998, compared with 24.4 percent for the mortgages that primary market lenders are market. The GSEs argued strongly that they entire conforming market (excluding B&C willing to sell’’ and that certain types of have led the mortgage market, from both loans). Based on comparisons such as these, products (such as ARMs) ‘‘are particularly quantitative and qualitative perspectives HUD concludes that the GSEs need to difficult to structure for sale to the secondary (explained below). The GSEs expressed continue improving their performance so that market’’. Fannie Mae added that ‘‘HUD fails concern about HUD’s assumptions and they can match or exceed the overall market to adjust for those housing markets that are treatment of specific data in estimating the in affordable lending. not fully available to Fannie Mae and Freddie goals-qualifying shares for single-family In their comments, the GSEs reached the Mac’’. Freddie Mac stated that it ‘‘has not owner mortgages. The GSEs concluded that opposite conclusion—each stated that they achieved, and is unlikely to achieve in the HUD chose assumptions and data sources already match or even lead the market, near term, the same penetration in the that result in an overstatement of the low- depending on the affordable category being subprime and manufactured housing mod, special affordable, and underserved considered. The GSEs also assert that HUD’s segments of the market as it has achieved in areas shares of owner mortgages. analysis does not accurately reflect their the conventional, conforming market’’ and It should be noted that the GSEs extended performance relative to the overall market. therefore HUD should not include these their criticisms to other researchers who have Freddie Mac stated that ‘‘the shares of segments in its market definition. According examined this issue of their targeted lending Freddie Mac’s loan purchases serving low- to the GSEs, markets that are ‘‘not available’’ performance relative to the overall mortgage and moderate-income families, families in to them or where they are not a ‘‘full market. Section E.3 of this appendix underserved areas and minority families participant’’ should be excluded from HUD’s summarizes findings of several independent mirror those of the primary market’’. Freddie market definition. In addition to the studies that have also concluded that the Mac said that its market calculations subprime and manufactured housing GSEs have lagged the market in affordable ‘‘account for the limitations on loans we markets, examples of market segments lending. For the most part, these studies have [Freddie Mac] can purchase’’ (see below). mentioned by the GSEs for exclusion used the same HMDA-based methodology Similarly, Fannie Mae stated that ‘‘an included: low-down payment mortgages described in Section E.2 of this appendix. appropriate comparison between Fannie Mae (those with loan-to-value ratios greater than The GSEs focused many of their comments and the primary single-family market shows 80 percent) without private mortgage on the adequacy of HMDA data, the main that we [Fannie Mae] serve a higher insurance or some other credit enhancement; source for the goals-qualifying shares of the percentage of low- and moderate-income loans financed through state and local conventional conforming market, against borrowers, a higher percentage of minority housing finance agencies; below-market- which the GSEs are compared. The GSEs borrowers, and a higher percentage of interest-rate mortgages; specialized CRA argued that HMDA data are biased (i.e., borrowers in underserved areas than does the mortgages; and portions of depository overstate the goals-qualifying shares of the primary market’’. portfolios that are not available at mortgage market) and that significant portions of Both the GSEs and HUD rely on HMDA origination for purchase by the GSEs. HMDA data are not relevant for calculating data for the market estimates. However, as To analyze the availability of loans the market standard for evaluating GSE suggested by the GSEs’ comments, they originated by depositories to the GSEs, performance in the conventional conforming frequently adjust HMDA data to exclude Fannie Mae funded a study by KPMG market. These and related comments of the loans in the market that they perceive as not Barefoot-Marrinan (KPMG). According to GSEs are discussed below in subsections b– being available for them to purchase. The Fannie Mae, KPMG found that the advent of f. types of adjustments made by the GSEs, and the Community Reinvestment Act (CRA) had Both GSEs also argued that HUD’s analysis HUD’s response to those adjustments, are encouraged depositories to hold lower- and conclusions depended on a continuation discussed in the next subsection. HUD’s income loans in portfolio. Depositories may of recent conditions of economic expansion conclusions about the appropriate definition not offer their products for sale on the and low interest rates. According to the of the conventional conforming market are secondary market not only because they are
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GSEs than others, the data reported in Tables goals-qualifying percentages for GSE Freddie Mac estimated the impacts on A.7a and A.7b of this Appendix show that purchases, comparing columns 2 and 4 for HUD’s market estimates of excluding from the GSEs have ample opportunities to Fannie Mae, and columns 6 and 8 for Freddie the market definition both specialized purchase goals-qualifying mortgages. As Mac, show that the HMDA-reported goals- community development (CRA-type) loans market leaders, the GSEs should be looking qualifying percentages for loans sold to the and portions of depository portfolios. Based for innovative ways to pursue this business, GSEs are not always larger than the on Freddie Mac’s analysis, the low-mod rather than suggesting that it is not available corresponding percentages for loans the GSEs (underserved areas) share of the owner to the secondary market. Furthermore, there report as purchased. In fact, the HMDA- market would fall by four (three) percentage is evidence that the GSEs can earn reasonable reported percentages are more likely to be points and HUD’s overall low-mod and returns on their goals business. The smaller than the GSE-reported percentages underserved areas market estimates would Economic Analysis that accompanies this for the Special Affordable and Underserved each fall by about two percentage points. In final rule provides evidence that the GSEs Areas Goals, yielding conclusions different commenting on whether Freddie Mac leads have been earning financial returns on their from those drawn by Zorn and Berkovec with or lags depositories in affordable lending, purchases of goals-qualifying loans that are regard to bias in the HMDA data. In addition, Freddie Mac said that the HMDA data for only slightly below their 20–25 percent as noted in Appendix D, other research has depositories should be adjusted downward to return on equity from their normal business. concluded that a portion of lower-income exclude depositories’ high-LTV loans HUD also disagrees with other specific loan originations are not even reported to without private mortgage insurance, their comments offered by the GSEs. For example, HMDA. Thus it is not clear that more recent below-market rate loans, their subprime HUD does not think that the data for and complete data would support the Zorn loans, and coverage bias in HMDA (see the depositories should be adjusted downward as and Berkovec findings. next subsection). Based on these adjustments, proposed by Freddie Mac and Fannie Mae. e. Other Technical Comments Related to GSE Freddie Mac reduced the 1998 HMDA- Both types of institutions receive government Performance in Single-Family Owner Market reported underserved areas percentage for benefits and both operate in the conventional MSA-Level Analysis. In its comments, depositories from 26.1 percent to 20.0, which conforming market. Furthermore, if a GSE Fannie Mae raised several concerns about led Freddie Mac to conclude that its makes a business decision to not pursue HUD’s comparisons between Fannie Mae and performance equals or exceeds the certain types of goals-qualifying loans in one the primary market at the metropolitan performance of depositories on loans that are segment of the market, they are free to pursue statistical area (MSA) level (see Table A.5 in likely to be sold to Freddie Mac. goals-qualifying owner and rental property this appendix). Essentially, Fannie Mae HUD’s Response. In general, HUD mortgages in other segments of the market. questioned the relevance of any analysis at disagrees with the comments offered by the With respect to loans that are originated the local level, given that the housing goals GSEs about excluding those market segments without private mortgage insurance, the GSEs are national-level goals. HUD believes that its that they haven’t yet been able to penetrate have been quite innovative in structuring metropolitan-area analyses support and fully. Congress stated that HUD was to transactions to provide alternative credit enhancements. Between 1997 and 1999, clarify the national analyses on GSE estimate the size of the conventional performance. While official goal performance conforming mortgage market, not the market Freddie Mac was involved in 16 structured transactions totaling $8.1 billion, with is measured only at the national level, HUD that the GSEs perceive as available for them believes that analyses of, for example, the to purchase. However, with respect to the Freddie Mac’s 1999 business accounting for over $5 billion of this total.1 HUD gives full numbers of MSAs where Fannie Mae and subprime market, HUD believes that the Freddie Mac lead or lag the local market risky, B&C portion of that market should be goals credit for such credit-enhanced transactions. increases public understanding of the GSEs’ excluded from the market definition for each performance. For example, if the national of the housing goals. Thus, HUD includes Finally, it should be noted that the GSEs’ purchases under the housing goals are not aggregate data showed that one GSE lagged only the A-minus portion of the subprime the market in funding loans in underserved market in its overall estimates of the goals- limited to new mortgages that are originated in the current calendar year. The GSEs can areas, it would be of interest to the public to qualifying market shares. In Appendix D, determine if this reflected particularly poor HUD explains its methodology for adjusting purchase loans from the substantial, existing stock of affordable loans held in lenders’ performance in a few large MSAs or if it the overall market estimates to exclude B&C reflected shortfalls in many MSAs. In this loans. Section E.2 of this appendix uses portfolios, after these loans have seasoned and the GSEs have had the opportunity to case, an analysis of individual MSA data HMDA data and the GSEs’ loan-level data to would increase public understanding of that examine the GSEs’ performance in the single- observe their payment performance. In fact, based on Fannie Mae’s experience in 1997– GSE’s performance. family owner portion of the conventional Missing Data. Both GSEs mentioned the conforming mortgage market in metropolitan 98, the purchase of seasoned loans appears to be one useful strategy for purchasing goals- increasing problem of missing information in areas. B&C loans are not identified in HMDA HMDA data and in their own data bases— data; however, HUD shows the effects of qualifying loans. In Section E.2, HUD’s comparisons of the GSEs’ single-family particularly with regard to borrower race/ adjusting the owner market definition for performance with those of depositories and ethnicity. HUD agrees that treatment of subprime and B&C loans by using a list of the overall single-family market include the missing data is an important issue when lenders that specialize in subprime loans (see GSEs’ purchases of prior-year as well newly- measuring GSE performance and developing Table A.4b). originated loans. estimates of the size of the affordable market. Excluding other important segments of the Both Appendices A and D use several lower-income mortgage market, as the GSEs d. Bias in HMDA Data techniques for situations where data are recommend, would render the resulting Both GSEs refer to findings from a study limited or missing. HUD’s treatment of market benchmark useless for evaluating the by Peter Zorn and Jim Berkovec concerning missing data reflects a consistent GSEs’ performance. The loans that the GSEs potential bias in HMDA data.2 Based on a commitment to fair and reasonable analyses, would exclude are important sources of comparison of the borrower and census tract and is designed to permit ‘‘apples-to-apples’’ lower-income credit and, in fact, are among characteristics between Freddie Mac- comparisons between the GSEs and the the very loans the GSEs are supposed to be purchased loans (from Freddie Mac’s own market to the extent possible. When funding. A recent report by the Department data) and loans identified in 1993 HMDA calculating portfolio percentages for different of Treasury demonstrated the targeting of data as sold to Freddie Mac, Zorn and sectors of the mortgage market, HUD CRA-type loans to lower-income and Berkovec conclude that HMDA data followed its usual procedure of excluding minority families. Numerous studies have overstates the percentage of conventional, loans with missing data. In certain analyses shown that the manufactured home sector is conforming loans originated for lower- involving market shares, HUD used a variety an important source of low-income housing. income borrowers and for properties located of techniques such as reallocating missing In many of these markets, a more active in underserved census tracts. The data data, making adjustments for undercoverage secondary market would encourage lending reported in Table A.4a of this appendix, by HMDA data, or using data from other
VerDate 112000 18:02 Oct 30, 2000 Jkt 194001 PO 00000 Frm 00049 Fmt 4701 Sfmt 4700 E:\FR\FM\31OCR2.SGM pfrm08 PsN: 31OCR2 65092 Federal Register / Vol. 65, No. 211 / Tuesday, October 31, 2000 / Rules and Regulations sources to estimate the absolute number of HUD understands the important role that by the GSEs. The GSEs can work to improve mortgage originations. In general, HUD the GSEs play in the market and applauds overall efficiency and stability in this market believes that methods for addressing missing their efforts to re-examine their underwriting by developing new products and promoting data are reasonable and appropriate. standards and to reach out to traditionally increased standardization and streamlined Lender-Purchased Loans. When analyzing underserved borrowers and neighborhoods. procedures. HMDA data, Fannie Mae included loans This perspective is reflected in Section G of The GSEs have been immensely successful purchased by lenders, as well as loans this appendix, which discusses qualitative in the financing of traditional single-family originated by lenders, in its market dimensions of the GSEs’ ability to lead the housing. HUD recognizes that ‘‘untapped’’ definition. HUD included only HMDA- industry. HUD concludes that due to their markets will present some difficulties and reported mortgage originations in its market dominant role in the market, their ability to challenges for the GSEs. But by helping definition—mortgages purchased by lenders influence the types of loans that lenders will develop a secondary market in these areas, were not included in HUD’s market data. To originate, their utilization of state-of-the-art the GSEs will bring increased liquidity, do so would involve double counting loan technology, and their financial strength, the added stability, and ultimately lower interest originations in the HMDA data. GSEs have the ability to lead the market in rates and rents for lower-income families in Prior-Year/Current-Year Analysis. Fannie affordable lending and to reach out to those these segments of the market. Mae raised a number of concerns about markets that have traditionally not received h. Barriers to Higher GSE Performance on the HUD’s separation of its purchases into the benefits of an active secondary market. Housing Goals ‘‘prior-year’’ loans and ‘‘current-year’’ loans. g. Linking Housing Needs to GSEs Fannie Mae raised concerns with respect to Section E.2 of this appendix discusses this Fannie Mae commented that HUD’s the interplay of the housing goals and the issue in some detail. Much of HUD’s analysis analysis of housing needs in Appendix A risk-based capital standard proposed by is conducted along the lines that Fannie Mae needed to more carefully identify the OFHEO. Fannie Mae stated that ‘‘the risk- recommends—considering each GSE’s total appropriate roles for the public sector and based capital proposal represents another purchases (of both prior-year mortgages and the GSEs. Similar to its comments on HUD’s potentially significant barrier to meeting the current-year mortgages) in a single calendar 1995 rule, Fannie Mae expressed concern goals that was not analyzed by the year. For example, see the discussion of the that HUD did not distinguish between Department.’’ OFHEO previously addressed GSEs’ past performance in Section E of this general housing needs of low- and moderate- this question in their notice of proposed appendix and the data in Tables A.3 and A.4. income households and those needs that the rulemaking, dated April 13, 1999, concluding But HUD believes the GSEs’ performance GSEs can reasonably be expected to address. that ‘‘the risk-based capital standard will not should also be analyzed by focusing on the In this appendix, HUD presents an analysis affect the Enterprises’ ability to purchase total number of mortgages from a particular of general housing needs to comply with affordable housing loans.’’ 3 In part, this origination year that the GSEs have FHEFSSA, which requires the Secretary to conclusion was based on the finding that in purchased to date. Comparing the GSEs’ consider such needs when establishing the 1996 and 1997, Freddie Mac would have current-year purchases, including prior-year housing goals. HUD’s examination of enjoyed capital surpluses under OFHEO’s originations, with newly-originated national housing needs does not suggest that proposed rule, despite increased purchases of mortgages would result in somewhat of an the GSEs can or should meet all of those loans meeting the housing goals. OFHEO ‘‘apples-to-oranges’’ comparison. Hence, to needs. Rather, the analysis is intended to concluded that even in more adverse conduct more of an ‘‘apples-to-apples’’ provide background on the evolution and economic environments, ‘‘the capital cost of comparison between the GSEs and the current state of the housing markets for low- single family loans meeting the Enterprises’ market, it is necessary to restrict the analysis and moderate-income households. HUD affordable housing goals should not be to GSE loan acquisitions originated in a recognizes that the GSEs alone can not materially different, on average, from the cost particular year (see Tables A.7a and A.7b). mitigate some of the more extreme problems of other loans.’’ HUD recognizes some of the problems that identified in this analysis. Of the various issues mentioned by Fannie result from analyses that focus on a single However, with more focused effort, the Mae in relation to OFHEO’s proposed origination year. However, as indicated by GSEs can assist in addressing several regulation, implications of the rule for high- the variety of analyses provided in Appendix problems discussed in this appendix with LTV and multifamily lending are of the A, HUD believes that both frameworks are regard to single-family and multifamily greatest relevance with regard to affordable useful for understanding the GSEs’ role in the housing. On the single-family side, the GSEs lending and the GSEs’ housing goals. affordable lending market. can develop secondary market programs for High-LTV Lending. Fannie Mae stated f. Leading the Market—The Qualitative ‘‘untapped’’ markets such as 2–4 unit rental concerns regarding the impacts of the Dimension properties and properties needing proposed OFHEO regulation on high-LTV rehabilitation in the nation’s inner cities. The lending: The GSEs commented that they make a GSEs can increase their support of more The risk-based capital regulation as sizable contribution toward serving the customized mortgage products and proposed imposes disproportionately high housing needs of a wide range of American underwriting, with greater outreach to those capital requirements on high-LTV loans. families through their innovative outreach families who have not been served with and the overall leadership they provide to the traditional products, underwriting, and These requirements will impair our ability affordable lending market. This ‘‘qualitative’’ marketing. Particularly important in this to serve those borrowers with limited dimension of market leadership comes from regard, the GSEs can ensure that their resources. High-LTV lending is critically their normal operations in the market. Each automated underwriting systems recognize important to our affordable housing GSE gave numerous examples of their market initiatives and outreach to first-time the special circumstances of lower-income 4 leadership, similar to the discussion that and minority borrowers. As discussed in homebuyers. HUD provides in Section G of this appendix. Section 3.d of this appendix, HUD and others It is not apparent that OFHEO’s proposed Fannie Mae noted its Trillion Dollar are concerned about potential negative effects rulemaking would impose Commitment, its programs with minority-and of mortgage scoring on industry efforts to ‘‘disproportionate’’ capital requirements on women-owned lenders, its initiative with reach out to lower-income and minority high-LTV loans. Because high-LTV loans Community Development Financial families. typically have higher default rates, it is Institutions, and its numerous initiatives in On the multifamily side, with new product reasonable to require the GSEs to hold more the technology area. Freddie Mac noted development and partnerships, the GSEs can capital against high-LTV loans than against similar program initiatives and outreach more fully address the credit needs of the low-LTV loans, other things being equal. efforts, and stated that it has been a ‘‘leader current market for affordable rental housing. If Fannie Mae’s view is that the proposed in removing historical barriers to mortgage This appendix cities several areas where the OFHEO regulation requires the GSEs to hold credit’’ and that a recent HUD-commission GSEs can help. One segment that would more capital against high-LTV loans than is study commended both Freddie Mac and benefit from a more active secondary market the case for other financial institutions, their Fannie Mae for their leadership in the is small multifamily properties—an comments submitted in response to HUD’s liberalization of mortgage underwriting important part of the rental housing market proposed housing goals rule do not contain standards. that is currently not being adequately served any material documenting such a claim.
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However, it is noteworthy that the GSEs are important for understanding mortgage jumped sharply in 1999 to 46.1 percent, enjoy benefits not conferred on other markets. Information is provided which exceeding Fannie Mae’s performance for the financial institutions (e.g., exemption from describes the market environment in which first time, by a narrow margin. state and local taxes and exemption from the GSEs must operate (for example, trends • Several studies have shown that both securities registration). There is no evidence in refinancing activity) and is useful for Fannie Mae and Freddie Mac lag behind that Congress intended for the GSE risk-based gauging the reasonableness of specific levels depository institutions and the overall capital requirements to be strictly of the Low- and Moderate-Income Housing conventional conforming market in providing comparable to capital standards for other Goal. In addition, the severe housing affordable home loans to lower-income regulated financial institutions. problems faced by lower-income families are borrowers and underserved neighborhoods. OFHEO’s proposed rule would require the discussed. Though 1998 Fannie Mae made efforts to GSEs to hold more capital against high-LTV The third factor (past performance) and the improve its performance, while Freddie Mac loans, assuming the GSEs charge the same fifth factor (ability of the GSEs to lead the made less improvement, and therefore fell guarantee against such loans as they do industry) are also discussed in some detail in behind Fannie Mae, depositories, and the against low-LTV loans. In practice, however, this Appendix. The fourth factor (size of the overall market in serving lower-income and the GSEs implicitly charge higher guarantee market) and the sixth factor (need to minority families and their neighborhoods. fees on high-LTV loans, mitigating the need maintain the GSEs’ sound financial This indicated that there was room for both for additional capital beyond what is added condition) are mentioned only briefly in this GSEs (but particularly Freddie Mac) to through the guarantee fee. In its discussion Appendix. Detailed analyses of the fourth improve their funding of single-family home of this issue, OFHEO concluded that ‘‘Both factor and the sixth factor are contained in mortgages for lower-income families and Enterprises use internal capital models that Appendix D and in the economic analysis of underserved communities. Data on the reflect the higher risk of high LTV loans and this rule, respectively. performance of depositories and the primary already may incorporate higher capital costs The factors are discussed in sections B market is not yet available for 1999, thus it into the implicit fees charged for these through H of this appendix. Section I is not possible to determine if the GSEs loans.’’ 5 summarizes the findings and presents the continued to lag these sectors of the market In addition, OFHEO observed that Department’s conclusions concerning the last year. But, based on the data provided by multifamily loans, which predominantly Low- and Moderate-Income Housing Goal. the GSEs to the Department, Freddie Mac’s benefit low-and moderate-income The consideration of the factors in this single-family low- and moderate-income households, act as a hedge against high-LTV appendix has led the Secretary to the performance in 1999 exceeded Fannie Mae’s loans in a down-rate environment ‘‘so that following conclusions: performance. It remains to be seen whether higher costs on high LTV single family loans • Despite the record national this represents a new trend, or a temporary are substantially offset by lower costs on homeownership rate of 66.8 percent in 1999, reversal of the pattern for the 1996–98 multifamily loans,’’ reducing the amount of much lower rates prevailed for minorities, period. capital that the GSEs would otherwise be especially for African-American households • The GSEs’ presence in the goal- required to hold against high-LTV loans. (46.7 percent) and Hispanics (45.5 percent), qualifying market is significantly less than Multifamily Risk-Sharing. Fannie Mae and these lower rates are only partly their presence in the overall mortgage contends that, under the provisions of accounted for by differences in income, age, market. Specifically, HUD estimates that they OFHEO’s proposed rule, its Delegated and other socioeconomic factors. accounted for 40 percent of all owner- Underwriting and Servicing (DUS) • Pervasive and widespread disparities in occupied and rental units financed in the multifamily program ‘‘will be impaired mortgage lending continued across the nation primary market in 1997, but only 32 percent because of the onerous ‘‘haircuts’’ specified in 1998, when the loan denial rate was 10.2 of low- and moderate-income units financed. in the proposed capital regulation.’’ The percent for white mortgage applicants, but Their role was even lower for low-and ‘‘haircuts’’ mentioned by Fannie Mae refer to 23.9 percent for African Americans and 18.9 moderate-income rental properties, where adjustments for counterparty risk proposed percent for Hispanics.6 they accounted for 26 percent of low- and by OFHEO under risk-sharing provisions • Despite strong economic growth, low moderate-income multifamily units financed such as those governing the DUS program. unemployment, the lowest mortgage rates in and only 14 percent of low- and moderate- Because of the importance of counterparty 1998–99 in 25 years, and relatively stable income single-family rental units financed. risk to GSE safety and soundness, it is home prices, there is clear and compelling These general patterns were also evident in certainly reasonable and necessary for evidence of deep and persistent housing 1998, a heavy refinance year, except that the OFHEO to take such risk into consideration problems for Americans with the lowest GSEs had a higher share of the single-family in formulating its risk-based capital incomes. The number of very-low-income owner market. regulation for the GSEs. HUD notes that American households with ‘‘worst case’’ • Other issues have also been raised about OFHEO received extensive comments from housing needs is at an all-time high—5.4 the GSEs’ affordable lending performance. A the GSEs and others on this issue in response million.7 large percentage of the lower-income loans to its proposed rule. Because the OFHEO • Changing population demographics will purchased by the enterprises have relatively capital standard is presently at the proposed result in a need for the primary and high down payments, which raises questions rule stage, and not a final rule, it would be secondary mortgage markets to meet about whether the GSEs are adequately premature and inappropriate for HUD to nontraditional credit needs, respond to meeting the mortgage credit needs of lower- speculate at this time on the possible diverse housing preferences and overcome income families who do not have sufficient implications of OFHEO’s capital standards information barriers that many immigrants cash to make a high down payment. Also, on GSE multifamily performance. The and minorities face. In addition, market while single-family rental properties are an multifamily market and the GSEs’ segments such as single-family rental important source of low- and moderate- capabilities within it will continue to evolve properties, small multifamily properties, income rental housing, they represent only a during and after the time period when manufactured housing, and older inner city small portion of the GSEs’ business. OFHEO revises and finalizes its proposed properties would benefit from the additional • Freddie Mac has re-entered the capital regulation in response to comments. financing and pricing efficiencies of a more multifamily market, after withdrawing for a Any implications of the OFHEO capital active secondary mortgage market. time in the early 1990s. Thus, concerns standards for GSE activities related to • The Low- and Moderate-Income Housing regarding Freddie Mac’s multifamily multifamily mortgages or affordable housing Goals for both GSEs were 40 percent in 1996 capabilities no longer constrain their will merit consideration in future rounds of and 42 percent in 1997–1999. Fannie Mae performance with regard to the Low- and HUD’s GSE rulemaking. surpassed these goals, with a performance of Moderate-Income Housing Goal and the 45.6 percent in 1996, 45.7 percent in 1997, Special Affordable Housing Goal to the same 4. Conclusions Based on Consideration of the 44.1 percent in 1998, and 45.9 percent in degree that prevailed at the time the Factors 1999. Freddie Mac’s performance of 41.1 Department issued its 1995 GSE regulations. The discussion of the first two factors percent in 1996, 42.6 percent in 1997 and However, Freddie Mac’s multifamily covers a range of topics on housing needs 42.9 percent in 1998 narrowly exceeded presence remains proportionately lower than and economic and demographic trends that these goals, but Freddie Mac’s performance that of Fannie Mae. For example, units in
VerDate 112000 18:02 Oct 30, 2000 Jkt 194001 PO 00000 Frm 00051 Fmt 4701 Sfmt 4700 E:\FR\FM\31OCR2.SGM pfrm08 PsN: 31OCR2 65094 Federal Register / Vol. 65, No. 211 / Tuesday, October 31, 2000 / Rules and Regulations multifamily properties accounted for 7.3 Importance of Homeownership. Hispanics, who have lower average levels of percent of Freddie Mac’s mortgage purchases Homeownership is one of the most common educational attainment than whites, are during 1994–99, compared with 11.8 percent forms of property ownership as well as especially disadvantaged by the erosion in for Fannie Mae. Because a relatively large savings.10 Historically, home equity has been wages among less educated workers. proportion of multifamily units qualify for the largest source of wealth for most In addition to low income, high debts are the Low- and Moderate-Income Housing Goal Americans. Only recently has stock equity a primary reason households cannot afford to and the Special Affordable Housing Goal, exceeded home equity as a share of total purchase a home. According to a 1993 through 1998 Freddie Mac’s lower household wealth. Even with stocks Census Bureau report, nearly 53 percent of multifamily presence was a major factor appreciating faster than home prices over the renter families have both insufficient income contributing to its weaker overall past decade, still 59 percent of all and excessive debt problems that may cause performance on these two housing goals homeowners in 1998 held more than half of difficulty in financing a home purchase.15 relative to Fannie Mae. But in 1999, their net wealth in the form of home equity. High debt-to-income ratios frequently make multifamily units accounted for 8.2 percent Among low-income homeowners (household potential borrowers ineligible for mortgages of total units financed by Freddie Mac and income less than $20,000), half held more based on the underwriting criteria 9.5 percent of total units financed by Fannie than 70 percent of their wealth in home established in the conventional mortgage Mae, the narrowest gap of the 1994–99 equity in 1995.11 Median net wealth for market. period. renters was less than four percent of the An additional barrier to homeownership is • The overall presence of both GSEs in the median net wealth for homeowners in 1998. the fear and uncertainty about the buying multifamily mortgage market falls short of For low-income households, renter median process and the risks of ownership. A study their involvement in the single-family net wealth is less than two percent of using focus groups with renters found that market. Specifically, the GSEs’ purchases of homeowner median net wealth.12 Thus a even among those whose financial status 1997 originations accounted for 50 percent of homeownership gap translates directly into a would make them capable of the owner market, but only 24 percent of the wealth gap. homeownership, many felt that the buying multifamily market. Further expansion of the Homeownership promotes social and process was insurmountable because they presence of both GSEs in the multifamily community stability by increasing the feared rejection by the lender or being taken market is needed in order for them to make number of stakeholders and reducing advantage of.16 Also, many feared the significant progress in closing the gaps disparities in the distributions of wealth and obligations of ownership, because of between the affordability of their mortgage income. There is growing evidence that concerns about the risk of future purchases and that of the overall planning for and meeting the demands of deterioration of the house or the conventional market. homeownership may reinforce the qualities • neighborhood. The GSEs have proceeded cautiously in of responsibility and self-reliance. White and Finally, discrimination in mortgage expanding their multifamily purchases Green 13 provide empirical support for the lending continues to be a barrier to during the 1990s. Fannie Mae’s multifamily association of homeownership with a more homeownership. Disparities in treatment lending has been described by Standard & responsible, self-reliant citizenry. Both between borrowers of different races and Poor’s as ‘‘extremely conservative,’’ and private and public benefits are increased to neighborhoods of different racial makeup Freddie Mac has not experienced a single the extent that developing and reinforcing have been well documented. These default on the multifamily mortgages it has these qualities improve prospects for 8 disparities are discussed in the next section. purchased since 1993. By the end of 1999, individual economic opportunities. both GSEs’ multifamily performance had Barriers to Homeownership. Insufficient 2. Disparities in Mortgage Financing improved to the point where multifamily income, high debt burdens, and limited Disparities Between Borrowers of Different delinquency rates were lower than those for savings are obstacles to homeownership for Races. Research based on Home Mortgage single-family loans.9 • younger families. As home prices Disclosure Act (HMDA) data suggests Because of the advantages conferred by skyrocketed during the late 1970s and early pervasive and widespread disparities in Government sponsorship, the GSEs are in a 1980s, real incomes also stagnated, with mortgage lending across the Nation. For unique position to provide leadership in earnings growth particularly slow for blue 1998, the denial rate for white mortgage addressing the excessive cost and difficulty collar and less educated workers. Through applicants was 10.2 percent, while 23.9 in obtaining mortgage financing for most of the 1980s, the combination of slow percent of African-American and 18.9 underserved segments of the multifamily income growth and increasing rents made percent of Hispanic applicants were denied. market, including small properties with 5–50 saving for home purchase more difficult, and Even after controlling for income, the units and properties in need of rehabilitation. relatively high interest rates required large African-American denial rate was B. Factor 1: National Housing Needs fractions of family income for home mortgage approximately twice that of white applicants. This section reviews the general housing payments. Thus, during that period, fewer A major study by researchers at the Federal needs of low- and moderate-income families households had the financial resources to Reserve Bank of Boston found that mortgage that exist today and are expected to continue meet down payment requirements, closing denial rates remained substantially higher for in the near future. In so doing, the section costs, and monthly mortgage payments. minorities in 1991–93, even after controlling 17 focuses on the affordability problems of Economic expansion and lower mortgage for indicators of credit risk. African- lower- income families and on racial rates substantially improved homeownership American and Hispanic applicants in Boston disparities in homeownership and mortgage affordability during the 1990s. Many young, with the same borrower and property lending. It also notes some special problems, lower-income, and minority families who characteristics as white applicants had a 17 such as the need to rehabilitate our older were closed out of the housing market during percent denial rate, compared with the 11 urban housing stock. the 1980s re-entered the housing market percent denial rate experienced by whites. A during the last decade. However, many subsequent study conducted at the Federal 1. Homeownership Gaps households still lack the financial resources Reserve Bank of Chicago reported similar Despite a record national homeownership and earning power to take advantage of findings.18 rate, many Americans, including today’s homebuying opportunities. Several Several possible explanations for these disproportionate numbers of racial and trends have contributed to the reduction in lending disparities have been suggested. The ethnic minorities, are shut out of the real earnings of young adults without studies by the Boston and Chicago Federal homeownership opportunities. Although the college education over the last 15 years, Reserve Banks found that racial disparities national homeownership rate for all including technological changes that favor cannot be explained by reported differences Americans was at an all-time high of 67.1 white-collar employment, losses of unionized in creditworthiness. In other words, percent in the first quarter of 2000, the rate manufacturing jobs, and wage pressures minorities are more likely to be denied than for minority households was lower. The exerted by globalization. Fully 45 percent of whites with similar credit characteristics, homeownership rate for African-American the nation’s population between the ages of which suggests lender discrimination. In households was 47.4 percent. Similarly, just 25 and 34 have no advanced education and addition, loan officers, who may believe that 45.7 percent of Hispanic households owned are therefore at risk of being unable to afford race is correlated with credit risk, may use a home. homeownership.14 African Americans and race as a screening device to save time, rather
VerDate 112000 19:15 Oct 30, 2000 Jkt 194001 PO 00000 Frm 00052 Fmt 4701 Sfmt 4700 E:\FR\FM\31OCR2.SGM pfrm08 PsN: 31OCR2 Federal Register / Vol. 65, No. 211 / Tuesday, October 31, 2000 / Rules and Regulations 65095 than devote effort to distinguishing the prevalent in low-income areas are less rose to 5 percent (11 percent) in 1989 and 8 creditworthiness of the individual profitable to lenders because up-front fees to percent (13 percent) in 1997. The increase in applicant.19 This violates the Fair Housing loan originators are frequently based on a affordability problems apparently reflects a Act. percentage of the loan amount, although the rise in mortgage debt in the late 1980s and Underwriting Rigidities. Underwriting costs incurred are relatively fixed. early 1990s, from 21 percent of homeowners’ rigidities may fail to accommodate Geographic disparities in mortgage lending equity in 1983 to 36 percent in 1995.25 The creditworthy low-income or minority and the issue of mortgage redlining are Joint Center for Housing Studies also applicants. For example, under traditional discussed further in Appendix B. attributes this to the growing gap between underwriting procedures, applicants who housing costs and the incomes of the nation’s have conscientiously paid rent and utility 3. Affordability Problems and Worst Case poorest households.26 As a result of the bills on time but have never used consumer Housing Needs increased incidence of severe and moderate credit would be penalized for having no The severe problems faced by low-income cost burdens, the share of owners reporting credit record. Applicants who have remained homeowners and renters are documented in no problems fell from 84 percent in 1978 to steadily employed, but have changed jobs HUD’s ‘‘Worst Case Housing Needs’’ reports. 78 percent in 1989 and 75 percent in 1997. frequently, would also be penalized. Over the These reports, which are prepared biennially b. Problems Faced by Renters past few years, lenders, private mortgage for Congress, are based on the American insurers, and the GSEs have adjusted their Housing Survey (AHS), conducted every two Problems of all three types listed above are underwriting guidelines to take into account years by the Census Bureau for HUD. The more common among renters than among these special circumstances of lower-income latest report analyzes data from the 1997 homeowners. In 1997 there were 6.7 million families. Many of the changes recently AHS and focuses on the housing problems renter households (20 percent of all renters) undertaken by the industry to expand faced by low-income renters, but some data who paid more than 50 percent of their 27 homeownership have focused on finding is also presented on families living in owner- income for rent. Another 6.8 million faced alternative underwriting guidelines to occupied housing. In introducing the most a moderate rent burden, thus in total 40 establish creditworthiness that do not recent study, Secretary Cuomo noted that it percent of renters paid more than 30 percent disadvantage creditworthy minority or low- found that ‘‘despite the booming economy, of their income for rent. income applicants. worst case housing needs continue to Among very low-income renters, 72 However, because of the enhanced roles of increase’’ and such needs ‘‘have now reached percent faced an affordability problem, credit scoring and automated underwriting in an all-time high of million households.’’ 23 including 44 percent who paid more than the mortgage origination process, it is unclear The ‘‘Worst Cases’’ report measures three half of their income in rent. More than one- to what degree the reduced rigidity in types of problems faced by homeowners and third of renters with incomes between 51 industry standards will benefit borrowers renters: percent and 80 percent of area median family who have been adversely impacted by the • Cost or rent burdens, where housing income also paid more than 30 percent of their income for rent. traditional guidelines. Some industry costs or rent exceed 50 percent of income (a Affordability problems have increased over observers have expressed a concern that the ‘‘severe burden’’) or range from 31 percent to time among renters. The shares of renters greater flexibility in the industry’s written 50 percent of income (a ‘‘moderate burden’’); • with severe or moderate rent burdens rose underwriting guidelines may not be reflected The presence of physical problems from 32 percent in 1978 to 36 percent in 1989 in the numerical credit and mortgage scores involving plumbing, heating, maintenance, and 42 percent in 1997. which play a major role in the automated hallway, or the electrical system, which may The share of families living in inadequate underwriting systems that the GSEs and lead to a classification of a residence as housing in 1997 was higher for renters (12 others have developed. Thus lower-income ‘‘severely inadequate’’ or ‘‘moderately percent) than for owners (4 percent), as was and minority loan applicants, who often have inadequate;’’ and • the share living in overcrowded housing (6 lower credit scores than other applicants, Crowded housing, where there is more than one person per room in a residence. percent for renters, but only 1 percent for may be dependent on the willingness of owners). Crowding and inadequate housing lenders to take the time to look beyond such The study reveals that in 1997, 5.4 million households had ‘‘worst case’’ housing needs, were more common among lower-income credit scores and consider any appropriate renters, but among even the lowest income ‘‘mitigating factors,’’ such as the timely defined as housing costs greater than 50 percent of household income or severely group, affordability was the dominant payment of their bills, in the underwriting problem. The prevalence of inadequate and process. For example, there is a concern in inadequate housing among unassisted households. crowded rental housing diminished over the industry that a ‘‘FICO’’ score less than time until 1995, while affordability problems a. Problems Faced by Owners 620 means an automatic rejection of a loan grew. But in 1997 there were also sharp application without further consideration of Of the 65.5 million owner households in 20 increases in the inadequate and crowded any such factors. This could 1997, 5.5 million (8.5 percent) confronted a shares of rental housing. disproportionately affect minority applicants. severe cost burden and another 8.3 million Other problems faced by renters discussed More information on the distribution of (12.7 percent) faced a moderate cost burden. in the ‘‘Worst Cases’’ report include the loss credit scores and on the effects of There were 725,000 households with severe between 1991 and 1997 of 370,000 rental implementing automated underwriting physical problems and 916,000 which were 21 units affordable to very low-income families, systems is needed. overcrowded. The report found that 25.4 the increase in ‘‘worst case needs’’ among Disparities Between Neighborhoods. percent of American homeowners faced at working families between 1991 and 1997, Mortgage credit also appears to be less least one severe or moderate problem. and the shortage of units affordable to very accessible in low-income and high-minority Not surprisingly, problems were most low-income households (especially in the 24 neighborhoods. As discussed in Appendix B, common among very low-income owners. West). 1998 HMDA data show that mortgage denial More than a third of these households faced rates are nearly twice as high in census tracts a severe cost burden, and an additional 23 4. Other National Housing Needs with low-income and/or high-minority percent faced a moderate cost burden. And In addition to the broad housing needs composition, as in other tracts (19.4 percent 7 percent of these families lived in severely discussed above, there are additional needs versus 10.3 percent). Numerous studies have or moderately inadequate housing, while 2 confronting specific sectors of the housing found that mortgage denial rates are higher percent faced overcrowding. Only 38 percent and mortgage markets. This section presents in low-income census tracts, even accounting of very low-income owners reported no a brief discussion of three such areas and the 22 for other loan and borrower characteristics. problems. roles that the GSEs play or might play in These geographic disparities can be the result Over time the percentage of owners faced addressing the needs in these areas. Other of cost factors, such as the difficulty of with severe or moderate physical problems needs are discussed throughout these appraising houses in these areas because of has decreased, as has the portion living in appendices. the paucity of previous sales of comparable overcrowded conditions. However, homes. Sales of comparable homes may also affordability problems have grown—the a. Single-family Rental Housing be difficult to find due to the diversity of shares facing severe (moderate) cost burdens The 1996 Property Owners and Managers central city neighborhoods. The small loans were only 3 percent (5 percent) in 1978, but Survey reported that 51 percent of all rental
VerDate 112000 18:02 Oct 30, 2000 Jkt 194001 PO 00000 Frm 00053 Fmt 4701 Sfmt 4700 E:\FR\FM\31OCR2.SGM pfrm08 PsN: 31OCR2 65096 Federal Register / Vol. 65, No. 211 / Tuesday, October 31, 2000 / Rules and Regulations housing units are located in ‘‘multifamily’’ Lenders may be reluctant to extend credit 1. Recent Trends in the Housing Market properties—i.e, properties that contain 5 or because of a sometimes-inaccurate Solid economic growth, low interest rates, more rental units. The remaining 49 percent perception of high credit risk involved in price stability, and an unemployment rate of of rental units are found in the ‘‘mom and such loans. 4.2 percent, the lowest rate since 1969, pop shops’’ of the rental market—’’single- The GSEs and other market participants combined to make 1999 a very strong year for family’’ rental properties, containing 1–4 have recently begun to pay more attention to the housing market. The employment- units. These small properties are largely these needs for financing of affordable rental population ratio reached a record 64.3 individually-owned and managed, and in housing rehabilitation.29 However, extra percent last year, and a broad measure of many cases the owner-managers live in one effort is required, due to the complexities of labor market distress, combining the number of the units in the property. They include rehabilitation financing, as there is still a of unemployed and the duration of many properties in older cities, such as the need to do more. unemployment, was down by 54 percent duplexes in Baltimore and the triple-deckers from its 1992 peak.32 Rising real wages, a c. Small Multifamily Properties in Boston. A number of these single-family strong stock market, and higher home prices rental properties are in need of financing for There is evidence that small multifamily all contributed to a continuation of the rise rehabilitation, discussed in the next properties with 5–50 units have been in net household worth, contributing to the subsection. adversely affected by differentials in the cost strong demand for housing. Single-family rental units play an of mortgage financing relative to larger Homeownership Rate. In 1980, 65.6 especially important role in lower-income properties.30 While mortgage loans can percent of Americans owned their own housing. The 1997 AHS found that 59 generally be obtained for most properties, the home, but due to the unsettled economic percent of such units were affordable to very financing that is available is relatively conditions of the 1980s, this share fell to 63.8 low-income families—exceeding the expensive, with interest rates as much as 150 percent by 1989. Major gains in ownership corresponding share of 53 percent for basis points higher than those on standard have occurred over the last few years, with multifamily units. These units also play a multifamily loans. Loan products are the homeownership rate reaching a record significant role in the GSEs’ performance on characterized by shorter terms and adjustable level of 66.8 percent in 1999, when the the housing goals, since 30 percent of the interest rates. Borrowers typically incur costs number of households owning their own single-family rental units financed by the for origination and placement fees, home was 7 million greater than in 1994, an GSEs in 1999 were affordable to very low- unprecedented five-year increase. environmental reviews, architectural income families. Gains in homeownership have been certifications (on new construction or There is not, however, a strong secondary widespread in over the last six years.33 As a market for single-family rental mortgages. substantial rehabilitation projects), result, the homeownership rate rose from: While single-family rental properties inspections, attorney opinions and • 42.0 percent in 1993 to 46.7 percent in comprise a large segment of the rental stock certifications, credit reviews, appraisals, and 1999 for African American households, for lower-income families, they make up a market surveys.31 Because of a large fixed • 39.4 percent in 1993 to 45.5 percent in small portion of the GSEs’ business. In 1999 element, these costs are usually not scaled 1999 for Hispanic households, the GSEs purchased $26 billion in mortgages according to the mortgage loan amount or • 73.7 percent in 1993 to 77.6 percent in for such properties, but this represented 5 number of dwelling units in a property and 1999 for married couples with children, percent of the total dollar volume of each consequently are often prohibitively high on • 65.1 percent in 1993 to 67.2 percent in enterprise’s 1999 business and 8 percent of smaller projects. 1999 for household heads aged 35–44, and • total single-family units financed by each d. Other Needs 48.9 percent in 1993 to 50.4 percent in GSE. With regard to their market share, HUD 1999 for central city residents. estimates that the GSEs have financed only Further discussions of other housing needs However, as these figures demonstrate, about 19 percent of all single-family rental and mortgage market problems are provided sizable gaps in homeownership remain. units that received mortgages in 1998, well in the following sections on economic, Sales of New and Existing Homes.34 New below the GSEs’ estimated market share of 68 housing, and demographic conditions. In the home sales rose at a rate of 7.5 percent per percent for single-family owner properties. single-family area, for example, an important year between 1991 and 1999, and exceeded Given the large size of this market, the high trend has been the growth of the subprime the previous record level (set in 1998) by 2 percentage of these units which qualify for market and the GSEs’ participation in the A- percent in 1999. The market for new homes the GSEs’ housing goals, and the weakness of minus portion of that market. Manufactured has been strong throughout the nation, with the secondary market for mortgages on these housing finance and rural housing finance record sales in the South and Midwest during properties, an enhanced presence by Fannie are areas that could be served more 1999. New home sales in the Northeast and Mae and Freddie Mac in the single-family efficiently with an enhanced secondary West, while strong, are running below the rental mortgage market would seem market presence. In the multifamily area, peak levels attained during their strong job warranted.28 properties in need of rehabilitation represent markets of the mid-1980s and late-1970s, respectively. b. Rehabilitation Problems of Older Areas a market segment where financing has sometimes been difficult. Other housing The National Association of Realtors A major problem facing lower-income needs and mortgage market problems are also reported that 5.2 million existing homes were households is that low-cost housing units discussed. sold in 1999, overturning the old record set continue to disappear from the existing in 1998 by 5 percent. Combined new and housing stock. Older properties are in need C. Factor 2: Economic, Housing, and existing home sales also set a record of 6.2 of upgrading and rehabilitation. These aging Demographic Conditions: Single-Family million last year. Since existing homes properties are concentrated in central cities Mortgage Market account for more than 80 percent of the total and older inner suburbs, and they include market and sales of existing homes are strong This section discusses economic, housing, not only detached single-family homes, but throughout the country, combined sales and demographic conditions that affect the also small multifamily properties that have reach record levels in three of the four major begun to deteriorate. single-family mortgage market. After a review regions of the nation and came within 97 The ability of the nation to maintain the of housing trends and underlying percent of the record in the Northeast. quality and availability of the existing demographic conditions that influence One of the strongest sectors of the housing affordable housing stock and to stabilize the homeownership, the discussion focuses on market in recent years has been shipments of neighborhoods where it is found depends on specific issues related to the single-family manufactured homes, which more than an adequate supply of credit to rehabilitate owner mortgage market. This subsection doubled between 1991 and 1996, and and repair older units. But obtaining the includes descriptions of recent market essentially leveled off at the 1996 record funds to fix up older properties can be interest rate trends, homebuyer during 1997–99. Two-thirds of manufactured difficult. The owners of small rental characteristics, and the state of affordable home placements were in the South, where properties in need of rehabilitation may be lending. Section D follows with a discussion they comprised more than one-third of total unsophisticated in obtaining financing. The of the economic, housing, and demographic new homes sold in 1999. properties are often occupied, and this can conditions affecting the multifamily mortgage Economy/Housing Market Prospects. As complicate the rehabilitation process. market. noted above, the U.S. economy is coming off
VerDate 112000 18:02 Oct 30, 2000 Jkt 194001 PO 00000 Frm 00054 Fmt 4701 Sfmt 4700 E:\FR\FM\31OCR2.SGM pfrm08 PsN: 31OCR2 Federal Register / Vol. 65, No. 211 / Tuesday, October 31, 2000 / Rules and Regulations 65097 several years of economic expansion, 2. Underlying Demographic Conditions later in the first decade of the new 46 accompanied by low interest rates and high Over the next 20 years, the U.S. population millennium, softening the blow somewhat. housing affordability. In fact, 1999 was a is expected to grow by an average of 2.4 Immigrant Homebuyers. Past, present, and record year for housing sales. The remainder million per year. This will likely result in 1.1 future immigration will also help keep of this subsection discusses the future to 1.2 million new households per year, homeownership growth at a respectable prospects for the housing market. creating a continuing need for additional level. During the 1980s, 6 million legal According to Standard & Poor’s DRI, the housing.41 This section discusses important immigrants entered the United States, housing market is slowing down from the demographic trends behind these overall compared with 4.2 million during the 1970s 47 record breaking pace of over five million household numbers that will likely affect and 3.2 million during the 1960s. As a single-family existing homes sold during housing demand in the future. These result, the foreign-born population of the 1999.35 Sales of existing single-family homes demographic forces include the baby-boom, United States doubled from 9.6 million in are on a pace of 4.5 million units for 2000. baby-bust and echo baby-boom cycles; 1970 to 19.8 million in 1990, and is expected 48 Between 2001 and 2004, existing single- immigration trends; ‘‘trade-up buyers;’’ non- to reach 31 million by 2010. While family home sales are expected to average 4.2 traditional and single households; and the immigrants tend to rent their first homes million units. Housing starts are expected to growing income inequality between people upon arriving in the United States, average 1.5 million units over the same with different levels of education. homeownership rates are substantially higher period. Housing should remain affordable, as As explained below, the role of traditional among those that have lived here for at least indicated by out-of-pocket costs as a share of first-time homebuyers, 25-to-34 year-old 6 years. In 1996, the homeownership rate for disposable income, which are expected to married couples, in the housing market will recent immigrants was 14.7 percent while it continue their downward trend through be smaller in the next decade due to the was 67.4 percent for native-born households. For foreign-born naturalized citizens, the 2004, dipping below 24 percent by 2003. aging of the baby-boom population.42 homeownership rate after six years was a According to Standard & Poor’s DRI, the 30- However, growing demand from immigrants remarkable 66.9 percent.49 year fixed rate mortgage rate is expected to and non-traditional homebuyers will likely Immigration is projected to add even more average 8.4 percent in 2000, and then trend fill in the void. The Joint Center for Housing new Americans in the 1990s, which will help down to 7.7 percent by 2004. Studies recently projected that the share of offset declines in the demand for housing The Congressional Budget Office (CBO) 36 the U.S. population accounted for by racial caused by the aging of the baby-boom projects that real Gross Domestic Product and ethnic minorities would increase from 25 43 generation. While it is projected that will grow at an average rate of 2.7 percent percent to 30 percent by the year 2010. The immigrants will account for less than four from 2001 through 2005, down from the echo baby-boom (that is, children of the percent of all households in 2010, without expected 4.9 percent growth rate during baby-boomers) will also add to housing the increase in the number of immigrants, 2000. The ten-year Treasury rate is projected demand later in the next decade. Finally, the growing income inequality between people household growth would be 25 percent lower to average 6.0 percent between 2001 and over the next 15 years. As a result of the 2005. Inflation, as measured by the Consumer with and without a post-secondary education will continue to affect the housing market. continued influx of immigrants and the aging Price Index (CPI) is projected to remain of the domestic population, household modest during the same period, averaging 2.7 The Baby-Boom Effect. The demand for housing during the 1980s and 1990s was growth over the next decade should remain percent. The unemployment rate is expected driven, in large part, by the coming of at or near its current pace of 1.1–1.2 million to remain low over the next four years, homebuying age of the baby-boom new households per year, even though averaging 4.3 percent. generation, those born between 1945 and population growth is slowing. If this high Certain risks exist, however, which could 1964. Homeownership rates for the oldest of rate of foreign immigration continues, it is undermine the wellbeing of the economy. the baby-boom generation, those born in the possible that first-time homebuyers will The probability of a recession still exists for 1940s, rival those of the generation born in make up as much as half of the home the next couple of years. Under a pessimistic the 1930s. Due to significant house price purchase market over the next several scenario (10 percent probability), Standard & appreciation in the late-1970s and 1980s, years.50 Poor’s DRI predicts that if a stock-market older baby-boomers have seen significant Past and future immigration will lead to correction were to occur toward the end of gains in their home equity and subsequently increasing racial and ethnic diversity, 2000, housing starts could fall to 1.2 million have been able to afford larger, more especially among the young adult units. With relatively low inflation, DRI expensive homes. Circumstances were not so population. As immigrant minorities account anticipates that the Federal Reserve would favorable for the middle baby-boomers. for a growing share of first-time homebuyers respond quickly by lower interest rates. This Housing was not very affordable during the in many markets, HUD and others will have would revive the housing market, although 1980s, their peak homebuying age period. As to intensify their focus on removing the recovery would be slow, with starts not a result, the homeownership rate, as well as discrimination from the housing and returning to pre-recession levels until late wealth accumulation, for the group of people mortgage finance systems. The need to meet 2004.37 An alternative scenario has a born in the 1950s lags that of the generations nontraditional credit needs, respond to recession arriving in 2002, resulting from a before them.44 diverse housing preferences, and overcome Federal Reserve overreaction to higher As the youngest of the baby-boomers, those the information barriers that many inflation and a stock market correction in late born in the 1960s, reached their peak immigrants face will take on added 2001 or early 2002 (which DRI predicts with homebuying years in the 1990s, housing importance. a probability of 35 percent). Under this became more affordable. While this cohort Trade-up Buyers. The fastest growing scenario, housing starts would fall to almost has achieved a homeownership rate equal to demographic group in the early part of the one million units. As a result of lower the middle baby-boomers, they live in larger, next millennium will be 45-to 65-year olds. interest rates, the housing market would more expensive homes. As the baby-boom This will translate into a strong demand for rebound strongly, with starts reaching near- generation ages, demand for housing from upscale housing and second homes. The record levels by the end of 2004.38 this group is expected to wind down.45 greater equity resulting from recent increases In addition to DRI and CBO, the Mortgage The baby-boom generation was followed by in home prices should also lead to a larger Bankers Association predicts that for 2000/ the baby-bust generation, from 1965 through role for ‘‘trade-up buyers’’ in the housing 2001 housing starts will reach 1.6/1.5 million 1977. Since this population cohort is smaller market during the next 10 to 15 years. units for 2000 and 2001 and the 30-year fixed than that of the baby-boom generation, it is Nontraditional and Single Homebuyers. rate mortgage rate will average 8.5/9.0 expected to lead to reduced housing demand While overall growth in new households has percent.39 Fannie Mae predicts that the during the next decade, though, as discussed slowed down, nontraditional households Federal Reserve will successfully engineer a below, other factors have kept the housing have become more important in the soft landing, with real growth of the economy market very strong in the 1990s. However, homebuyer market. With later marriages and slowing to a two to three percent pace in the echo baby-boom generation (the children more divorces, single-person and single- 2001. As a result, mortgage originations of the baby-boomers, who were born after parent households have increased rapidly. should decline to $967 billion, 27 percent 1977), while smaller than the baby-boom First-time buyers include a record number of less than the 1998 record level.40 generation, will reach peak homebuying age never-married single households, although
VerDate 112000 18:02 Oct 30, 2000 Jkt 194001 PO 00000 Frm 00055 Fmt 4701 Sfmt 4700 E:\FR\FM\31OCR2.SGM pfrm08 PsN: 31OCR2 65098 Federal Register / Vol. 65, No. 211 / Tuesday, October 31, 2000 / Rules and Regulations their ownership rates still lag those of years. Low interest rates, modest increases in narrow range of 25–28 years which has married couple households. According to the home prices, and growth in real household prevailed since 1975. Chicago Title and Trust’s Home Buyers income have increased the affordability of One dimension of the mortgage market Surveys, the share of first-time homebuyers housing and resulted in a mortgage market which has changed in recent years is the who were never-married singles rose from 21 boom. Total originations of single-family increased popularity of low- or no-point percent in 1991 to 37 percent in 1996, and loans increased from $458 billion in 1990 to mortgages. FHFB reports that average initial to a record 43 percent in 1997. However, in $859 billion in 1997 and then jumped to a fees and charges (‘‘points’’) have decreased 1999 never-married singles fell to 30 percent record $1.507 trillion during the heavy from 2.5 percent of loan balance in the mid- of first-time homebuyers.51 The shares for refinancing year of 1998, before declining to 1980s to 2 percent in the late-1980s, 1.5 divorced/separated and widowed first-time $1.287 billion in 1999, the second highest percent in the early 1990s, and less than 1.0 homebuyers have stayed constant over the level recorded.56 There have also been many percent in 1995–97. In 1998, 21 percent of all period, at eight percent and one percent, changes in the structure and operation of the loans were no-point mortgages. These lower respectively.52 The National Association of mortgage market. Innovations in lending transactions costs have increased the Realtors reports that ‘‘single individuals, products, added flexibility in underwriting propensity of homeowners to refinance their unmarried couples and minorities are guidelines, the development of automated mortgages.60 entering the market as first-time buyers in underwriting systems and the rise of the Another recent major change in the record numbers.’’ 53 With the increase in subprime market, have had impacts on both conventional mortgage market has been the single person households, it is expected that the overall market and affordable lending proliferation of high loan-to-value ratio (LTV) there will be a greater need for apartments, during the 1990s. mortgages. Loans with LTVs greater than 90 condominiums and townhomes. The section starts with a review of trends percent (that is, down payments of less than Due to weak house price appreciation, in the market for mortgages on single-family 10 percent) made up less than 10 percent of traditional ‘‘trade-up buyers’’ stayed out of owner-occupied housing. Next, trends in the market in 1989–91, but 25 percent of the the market during the early 1990s. Their affordable lending, including new initiatives market in 1994–97. Loans with LTVs less absence may explain, in part, the large and changes to underwriting guidelines and than or equal to 80 percent fell from three- representation of nontraditional homebuyers the prospects for potential homebuyers are quarters of the market in 1989–91 to an during that period. However, since 1995 discussed. The section concludes with a average of 56 percent of mortgages originated home prices have increased 20 percent. summary of the activity of the GSEs relative in 1994–97. As a result, the average LTV rose Single-parent households are also expected to originations in the primary mortgage from 75 percent in 1989–91 to nearly 80 to decline as the baby-boom generation ages market. percent in 1994–97.61 out of the childbearing years. For these a. Basic Trends in the Mortgage Market The statistics cited above pertain only to home purchase mortgages. Refinance reasons, nontraditional homebuyers may Interest Rate Trends. The high and volatile mortgages generally have shorter terms and account for a smaller share of the housing mortgage rates of the 1980s and early 1990s lower loan-to-value ratios than home market in the future. have given way to a period with much lower purchase mortgages. Growing Income Inequality. The Census and more stable rates in the last six years. Mortgage Originations: Refinance Bureau recently reported that the top 5 Interest rates on mortgages for new homes percent of American households received were above 12 percent as the 1980s began Mortgages. Mortgage rates affect the volume 21.4 percent of aggregate household income and quickly rose to more than 15 percent.57 of both home purchase mortgages and in 1998, up sharply from 16.1 percent in After 1982, they drifted downward slowly to mortgages used to refinance an existing 1977. The share accruing to the lowest 80 the 9 percent range in 1987–88, before rising mortgage. The effects of mortgage rates on the percent of households fell accordingly, from back into double-digits in 1989–90. Rates volume of home purchase mortgages are felt 56.5 percent in 1977 to 50.8 percent in 1998. then dropped by about one percentage point through their role in determining housing The share of aggregate income accruing to a year for three years, reaching a low of 6.8 affordability, discussed in the next households between the 80th and 95th percent in October-November 1993 and subsection. However, the largest impact of percentiles of the income distribution was averaging 7.2 percent for the year as a whole. rate swings on single-family mortgage virtually unchanged over this period.54 Mortgage rates turned upward in 1994, originations is reflected in the volume of The increase in income inequality over the peaking at 8.3 percent in early 1995, but fell refinancings. past two decades has been especially to the 7.5 percent-7.9 percent range for most During 1992–93, homeowners responded significant between those with and those of 1996 and 1997. However, rates began to the lowest rates in 25 years by refinancing without post-secondary education. The another descent in late-1997 and averaged existing mortgages. In 1989–90 interest rates Census Bureau reports that by 1997, the 6.95 percent for 30-year fixed rate exceeded 10 percent, and refinancings mean income of householders with a high conventional mortgages during 1998, the accounted for less than 25 percent of total school education (or less) was less than half lowest level since 1968, before rising to an mortgage originations.62 The subsequent that for householders with a bachelor’s average of 7.44 percent in 1999.58 sharp decline in mortgage rates drove the degree (or more). According to the Joint Other Loan Terms. When mortgage rates refinance share over 50 percent in 1992 and Center for Housing Studies, inflation- are low, most homebuyers prefer to lock in 1993 and propelled total single-family adjusted median earnings of men aged 25 to a fixed-rate mortgage (FRM). Adjustable-rate originations to more than $1 trillion in 34 with only a high-school education mortgages (ARMs) are more attractive when 1993—twice the level attained just three decreased by 14 percent between 1989 and rates are high, because they carry lower rates years earlier. 1995.55 So, while homeownership is highly than FRMs and because buyers may hope to The refinance wave subsided after 1993, affordable, this cohort lacks the financial refinance to a FRM when mortgage rates because most homeowners who found it resources to take advantage of the decline. Thus the Federal Housing Finance beneficial to refinance had already done so opportunity. As discussed earlier, the days of Board (FHFB) reports that the ARM share of and because mortgage rates rose once again.63 the well-paying unionized factory job have the market jumped from 20 percent in the Total single-family mortgage originations passed. They have given way to technological low-rate market of 1993 to 39 percent when bottomed out at $639 billion in 1995, when change that favors white-collar jobs requiring rates rose in 1994.59 The ARM share has the refinance share was only 15 percent. This college degrees, and wages in the since trended downward, falling to 22 meant that refinance volume declined by manufacturing jobs that remain are percent in 1997 and a record low of 12 more than 80 percent in just two years. experiencing downward pressures from percent in 1998, before rising back to 22 A second surge in refinancings began in economic globalization. The effect of this is percent in 1999. late-1997, abated somewhat in early 1998, that workers without the benefit of a post- In 1997 the term-to-maturity was 30 years but regained momentum in June 1998. The secondary education find their demand for for 83 percent of conventional home refinance share rose above 30 percent in mid- housing constrained. purchase mortgages. Other maturities 1997, exceeded 40 percent in late-1997, and included 15 years (11 percent of mortgages), peaked at 64 percent in January, before 3. Single-Family Owner Mortgage Market 20 years (2 percent), and 25 years (1 percent). falling to 40 percent by May 1998. This share The mortgage market has undergone a great The average term was 27.5 years, up slightly increased steadily over the June–September deal of growth and change over the past few from 26.9 years in 1996, but within the 1998 period, and averaged 50 percent for
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1998. The refi boom ended abruptly in early to discrimination or social barriers—has total originations in the single-family 1999, as the share of loans for refinancings collapsed to the lowest level recorded in the mortgage market, measured in dollars, fell from 60 percent in the first quarter to 27 seven years Fannie Mae has sponsored its declined from 37 percent in 1996 to 32 percent in the second quarter and 22 percent annual National Housing Survey.’’ 65 percent in 1997—well below the peak of 51 in the third and fourth quarters. Total Specifically, the Mortgage Bankers percent attained in 1993. OFHEO attributes originations, driven by the volume of Association estimates that home purchase the 1997 downturn in the GSEs’ role to refinancings, amounted to $859 billion in mortgages rose to about $754 billion in 1998, increased holdings of mortgages in portfolio 1997 and were $1.507 trillion in 1998, nearly well above the previous record of $574 by depository institutions and to increased 50 percent higher than the previous record billion established in 1997. The boom competition with Fannie Mae and Freddie level of $1.02 trillion attained in 1993, before continued in 1999, with home purchase Mac by private label issuers. However, falling to $1.287 trillion last year. Total mortgage volume increasing further, to $824 OFHEO estimates that the GSEs’ share of the refinance mortgage volume in 1998 was billion. market rebounded sharply in 1998–99, to 43– estimated to be nearly 10 times the level First-time Homebuyers. First-time 42 percent. attained in 1995. The refinance wave from homebuyers have been the driving force in Mortgage Market Prospects. The Mortgage 1997 through early 1999 reflects other factors the recovery of the nation’s housing market Bankers Association (MBA) reports that besides interest rates, including greater over the past several years. First-time mortgage originations in 1999 were $1.3 borrower awareness of the benefits of homebuyers are typically people in the 25– trillion. This followed the record-breaking refinancing, a highly competitive mortgage 34 year-old age group that purchase modestly year of 1998, with $1.5 trillion in mortgage market, and the enhanced ability of the priced houses. As the post-World War II baby originations. Refinancing of existing mortgage industry (including the GSEs), boom generation ages, the percentage of mortgages was down from 1998’s 50 percent utilizing automated underwriting and Americans in this age group decreased from share of total mortgage originations to 34 mortgage origination systems, to handle this 28.3 percent in 1980 to 25.4 percent in percent in 1999, still higher than an average unprecedented volume expeditiously. 1992.66 Even though this cohort is smaller, year. Meanwhile, the ARM share in 1999 Mortgage Originations: Home Purchase first-time homebuyers increased their share increased from 12 percent in 1998 to 22 Mortgages. In 1972 the median price of of home sales. First-time buyers accounted percent of originations, reflecting the rise in existing homes in the United States was for about 45 percent of home sales in 1999. overall interest rates. The MBA predicts that $27,000 and mortgage rates averaged 7.52 Participation rates for first-time homebuyers mortgage originations will amount to $962 percent; thus with a 20 percent down so far this decade are all greater than or equal billion and $912 billion, with refinancings payment, a family needed an income of to 45 percent. This follows participation rates representing 16 and 12 percent of $7,200 to qualify for a loan on a median- that averaged 40 percent in the 1980s, originations, during 2000 and 2001, which is priced home. Actual median family income including a low of 36 percent in 1985. The more in line with a normal pace. ARMs are was $11,100, exceeding qualifying income by highest first-time homebuyer participation expected to account for a larger share, 32 55 percent. The National Association of rate was achieved in 1977, when it was 48 percent in 2000 and 34 percent in 2001, of Realtors (NAR) has developed a housing percent.67 total mortgage originations.69 Fannie Mae affordability index, calculated as the ratio of The Chicago Title and Trust Company projects that mortgage originations will fall to median income to qualifying income, which reports that the average first-time buyer in $967 billion for 2000, with 19 percent was 155 in 1972. 1999 was 32 years old and spent 5 months coming from refinancings, while 30 percent By 1982 NAR’s affordability index had looking at 12 homes before making a of originations will be in the form of ARMs.70 plummeted to 70, reflecting a 154 percent purchase decision. Most such buyers are b. Affordable Lending in the Mortgage Market increase in home prices and a doubling of married couples, but in 1999 29 percent had In the past few years, conventional lenders, mortgage rates over the decade. That is, never been married, 9 percent were divorced private mortgage insurers and the GSEs have qualifying income rose by nearly 400 percent, or separated, and 1 percent were widowed. begun implementing changes to extend to $33,700, while median family income First-time buyers paid an average of 34 homeownership opportunities to lower- barely doubled, to $23,400. With so many percent of after-tax income, or $1,090 per income and historically underserved families priced out of the market, single- month, on their mortgage payments in 1999, households. The industry has started offering family mortgage originations amounted to and saved for 2.2 years to accumulate a down more customized products, more flexible only $97 billion in 1982. payment. The National Association of underwriting, and expanded outreach so that Declining interest rates and the moderation Realtors reports that the median mortgage the benefits of the mortgage market can be of inflation in home prices have led to a amount for first-time buyers was $104,000 in extended to those who have not been dramatic turnaround in housing affordability 1999, corresponding to an LTV of 97 percent, adequately served through traditional in the last decade and a half. Remarkably, compared with a median mortgage amount of products, underwriting, and marketing. This qualifying income was $27,700 in 1993— $150,000 and an average LTV of 81 percent section summarizes recent initiatives $6,000 less than it had been in 1982. Median for repeat buyers. undertaken by the industry to expand family income reached $37,000 in 1993, thus GSEs’ Acquisitions as a Share of the affordable housing. The section also the NAR’s housing affordability index Primary Single-Family Mortgage Market. The discusses the significant role FHA plays in reached 133. Housing affordability remained GSEs’ single-family mortgage acquisitions making affordable housing available to at about 130 for 1994–97, with home price have generally followed the volume of historically underserved groups. increases and somewhat higher mortgage originations in the primary market for Down Payments. GE Capital’s 1989 rates being offset by gains in median family conventional mortgages, falling from 5.3 Community Homebuyer Program first income.64 Falling interest rates and higher million mortgages in the record year of 1993 allowed homebuyers who completed a income led to an increase in affordability to to 2.2 million mortgages in 1995, but program of homeownership counseling to 143 in 1998, reflecting the most affordable rebounding to 2.9 million mortgages in 1996. have higher than normal payment-to-income housing in 25 years. Affordability remained In 1997, however, single-family originations qualifying ratios, while providing less than high in 1999, despite the increase in were essentially unchanged, but the GSEs’ the full 5-percent down payment from their mortgage rates. acquisitions declined to 2.7 million own funds. Thus the program allowed The high affordability of housing, low mortgages.68 This pattern was reversed in borrowers to qualify for larger loans than unemployment, and high consumer 1998, when originations rose by 73 percent, would have been permitted under standard confidence meant that home purchase but the GSEs’ purchases jumped to 5.8 underwriting rules. Fannie Mae made this mortgages reached a record level in 1997. million mortgages. In 1999 the GSEs’ Community Homebuyer Program a part of its However, this record was surpassed in 1998, acquired 4.8 million single-family mortgages, own offerings in 1990. Affordable Gold is a as a July 1998 survey by Fannie Mae found a decline of 17 percent, which approximated similar program introduced by Freddie Mac that ‘‘every single previously cited barrier to the 15 percent decline in single-family in 1992. Many of these programs allowed 2 homeownership—from not having enough originations. percentage points of the 5-percent down money for a down payment, to not having Reflecting these trends, the Office of payment to come from gifts from relatives or sufficient information about how to buy a Federal Housing Enterprise Oversight grants and unsecured loans from local home, to the confidence one has in his job, (OFHEO) estimates that the GSEs’ share of governments or nonprofit organizations.
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In 1994, the industry (including lenders, programs with local lenders and affordable changes is not to loosen underwriting private mortgage insurers and the GSEs) housing groups, are an example of this standards, but rather to identify began offering mortgage products that initiative. Another example is the creditworthiness by alternative means that required down payments of only 3 percent, partnership Fannie Mae and the National more appropriately measure the plus points and closing costs. Other industry Association for the Advancement of Colored circumstances of lower-income households. efforts to reduce borrowers’ up front costs People (NAACP) announced in January The changes to underwriting standards have included zero-point-interest-rate 1999.72 Under this partnership, Fannie Mae include, for example: mortgages and monthly insurance premiums will provide funding for technical assistance • Using a stable income standard rather with no up front component. These new to expand the NAACP’s capacity to provide than a stable job standard. This particularly plans eliminated large up front points and homeownership information and counseling. benefits low-skilled applicants who have premiums normally required at closing. It will also invest in NAACP-affiliated successfully remained employed, even with During 1998, Fannie Mae introduced its affordable housing development efforts and frequent job changes. ‘‘Flexible 97’’ and Freddie Mac introduced its explore structures to assist the organization • Using an applicant’s history of rent and ‘‘Alt 97’’ low down payment lending in leveraging its assets to secure utility payments as a measure of programs. Under these programs borrowers downpayment funds for eligible borrowers. creditworthiness. This measure benefits are required to put down only 3 percent of Furthermore, Fannie Mae will provide up to lower-income applicants who have not the purchase price. The down payment, as $110 million in special financing products, established a credit history. well as closing costs, can be obtained from including a new $50 million underwriting • a variety of sources, including gifts, grants or experiment specifically tailored to NAACP Allowing pooling of funds for loans from a family member, the government, clientele. qualification purposes. This change benefits applicants with extended family members. a non-profit agency and loans secured by life Freddie Mac does not have a partnership • insurance policies, retirement accounts or office structure similar to Fannie Mae’s, but Making exceptions to the ‘‘declining other assets. While these programs started it has undertaken a number of initiatives in market’’ rule and clarifying the treatment of 74 out slowly, by November 1998 both GSEs’ specific metropolitan areas. Freddie Mac also mixed-use properties. These changes programs reached volumes of $200 million announced on January 15, 1999 that it benefit applicants from inner-city per month. entered into a broad initiative with the underserved neighborhoods. In early 1999, Fannie Mae announced that NAACP to increase minority These underwriting changes have been it would introduce several changes to its homeownership. Through this alliance, accompanied by homeownership counseling mortgage insurance requirements. The Freddie Mac and the NAACP seek to expand to ensure homeowners are ready for the planned result is to provide options for low community-based outreach, credit counseling responsibilities of homeownership. In downpayment borrowers to reduce their and marketing efforts, and the availability of addition, the industry has engaged in mortgage insurance costs. Franklin D. Raines, low-downpayment mortgage products with intensive loss mitigation to control risks. Fannie Mae chairman and chief executive flexible underwriting guidelines. As part of Increase in Affordable Lending During the officer stated, ‘‘Now, thanks to our the initiative, Freddie Mac has committed to 1990s.75 Home Mortgage Disclosure Act underwriting technology, our success in purchase $500 million in mortgage loans.73 (HMDA) data suggest that the new industry reducing credit losses, and innovative new The programs mentioned above are initiatives may be increasing the flow of arrangements with mortgage insurance examples of the partnership efforts credit to underserved borrowers. Between companies, we can increase mortgage undertaken by the GSEs. There are more 1993 and 1997 (prior to the heavy refinancing insurance options and pass the savings partnership programs than can be adequately during 1998), conventional loans to low- directly on to consumers.’’ 71 described here. Fuller descriptions of these income and minority families increased at Partnerships. In addition to developing programs are provided in their Annual much faster rates than loans to higher income new affordable products, lenders and the Housing Activity Reports. and non-minority families. As shown below, GSEs have been entering into partnerships Underwriting Flexibility. Lenders, mortgage over this period home purchase originations with local governments and nonprofit insurers, and the GSEs have also been to African Americans and Hispanics grew by organizations to increase mortgage access to modifying their underwriting standards to almost 60 percent, and purchase loans to underserved borrowers. Fannie Mae’s attempt to address the needs of families who low-income borrowers (those with incomes partnership offices in more than 40 central find qualifying under traditional guidelines less than 80 percent of area median income) cities, serving to coordinate Fannie Mae’s difficult. The goal of these underwriting increased by 45 percent.
1993±97 1995±97 (in percent) (in percent)
All Borrowers ...... 28.1 11.1 African Americans/Hispanics...... 57.7 ¥0.2 Whites ...... 21.9 8.9 Income Less Than 80% AMI ...... 45.1 15.4 Income Greater Than 120% AMI ...... 31.5 24.5
However, as also shown, in the latter part of a 40.0 percent increase in FHA-insured information on total (both home purchase of this period conventional lending for some loans originated for African-American and and refinance) loans, is included to give a groups slowed significantly. Between 1995 Hispanic borrowers. complete picture of mortgage activity. Both and 1997, the slowing of the growth of home Affordable Lending Shares by Major 1997 and 1998 HMDA data are included in purchase originations was much greater for Market Sector. The focus of the different these tables; the year 1997 represents a more low-income borrowers than for higher- sectors of the mortgage market on affordable typical year of mortgage activity than 1998, income borrowers. Moreover, even though lending can be seen by examining Tables which was characterized by heavy refinance remaining at near-peak levels in 1997, A.1a, A.1b, and A.1c. Tables A.1a and A.1b activity. The tables also include GSE data for conventional home purchase originations to present affordable lending percentages for 1999; the 1999 HMDA data will be African Americans and Hispanics actually FHA, the GSEs, depositories (banks and thrift incorporated when it is made available. decreased by two-tenths of a percent over the institutions), the conventional conforming The affordable market shares reported in past three years. It should be noted, however, sector, and the overall market.76 The parentheses for the conventional conforming that total loans (conventional plus discussion below will center on Table A.1a, market in Tables A.1a and A.1b were derived government) originated to African-American which provides information on home by excluding the estimated number of B&C and Hispanic borrowers increased between purchase loans and thus, homeownership loans from the HMDA data. HUD’s method 1995 and 1997, but this was mainly the result opportunities. Table A.1b, which provides for excluding B&C loans is explained in
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Section F.3a of Appendix D. Because B&C characteristics, can be illustrated using the sector of the mortgage market (FHA or the lenders operate mainly in the refinance FHA percentage for low-income borrowers: GSEs). In this case, the FHA market share of sector, excluding these loans from the market during 1997, 47.5 percent of all FHA-insured 33 percent for low-income borrowers is totals has little impact on the home purchase home purchase loans in metropolitan areas interpreted as follows: of all home purchase percentages reported in Table A.1a. The were originated for borrowers with an loans originated in metropolitan areas during reductions in the market shares are more income less than 80 percent of the local area 1997, 33 percent were FHA-insured loans. significant for total loans (reported in Table median income. Table A.1c, on the other A.1b) which include refinance as well as hand, presents ‘‘market share’’ percentages Thus, this ‘‘market share’’ percentage home purchase loans. that measure the portion of all home measures the importance of FHA to the The interpretation of the ‘‘distribution of purchase loans for a specific affordable market’s overall funding of loans for low- business’’ percentages, reported in Table lending category (such as low-income income borrowers. A.1a for several borrower and neighborhood borrowers) accounted for by a particular BILLING CODE 4210±27±P
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BILLING CODE 4210±27±C it insured 33 percent of all mortgages market definition).80 As shown in Table A.1a, Four main conclusions may be drawn from originated in underserved areas.79 the results change when other minority the data presented in Tables A.1a and A.1c. Second, the affordable lending shares for borrowers are considered. Fannie Mae First, FHA places much more emphasis on the conventional conforming sector are low purchased mortgages for minority borrowers affordable lending than the other market for minority borrowers, particularly African- and their neighborhoods at higher rates than sectors. Low-income borrowers accounted for American borrowers. For example, African- these loans were originated by primary 47.5 percent of FHA-insured loans during American borrowers accounted for only 5.0 lenders in the conventional conforming 1997, compared with 21.2 percent of the percent of all conventional conforming home market. During 1997, 17.7 percent of Fannie home loans purchased by the GSEs, 29.4 purchase loans originated during 1997 and Mae’s purchases were mortgages for minority percent of home loans retained by 1998, compared with over 14 percent of borrowers, compared with 16.5 percent of FHA-insured loans and over 7.5 percent of all depositories, and 27.3 percent of conventional conforming loans. During 1998, home purchase loans originated in the 14.0 percent of Fannie Mae’s purchases conventional conforming loans.77 Likewise, market. The African-American share of the financed homes in high-minority census 41.3 percent of FHA-insured loans were GSEs’ purchases is even lower than the tracts, compared with 14.1 percent of originated in underserved census tracts, corresponding share for the conventional conventional conforming loans (or 13.7 while only 22.1 percent of the GSE- conforming market. In 1998, home purchase percent without B&C loans). However, as purchased loans and 25.2 percent of loans to African-Americans accounted for 3.2 suggested by the data presented above, the conventional conforming loans were percent of Freddie Mac’s purchases, 3.8 minority lending performance of originated in these tracts.78 As shown in percent of Fannie Mae’s purchases, and 4.9 conventional lenders has been subject to Table A.1c, while FHA insured only 23 percent of loans originated in the much criticism in recent studies. These percent of all home purchase mortgages conventional conforming market (or 4.7 studies contend that primary lenders in the originated in metropolitan areas during 1997, percent if B&C loans are excluded from the conventional market are not doing their fair
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As a result, the CRA market in general to list home purchase as their market in funding affordable loans for low- segment may provide an opportunity for ‘‘number-one priority.’’ income families and their neighborhoods Fannie Mae and Freddie Mac to expand their Further increases in the homeownership during 1997 and 1998—in 1998, for example, affordable lending programs. In mid-1997, rate also depend on whether or not recent low-income census tracts accounted for 7.9 Fannie Mae launched its Community gains in the homeowning share of specific percent of Freddie Mac’s purchases, 9.4 Reinvestment Act Portfolio Initiative. Under groups are maintained. Minorities accounted percent of Fannie Mae’s purchases, 12.1 this pilot program Fannie Mae purchases for 18 percent of homeowners in 1999, but percent of loans retained by depositories, and seasoned CRA loans in bulk transactions the Joint Center for Housing Studies has 10.7 percent of all home loans originated by taking into account track record as opposed pointed out that minorities account were conventional conforming lenders. This to relying just on underwriting guidelines. By responsible for nearly 40 percent of the 6.9 pattern of Freddie Mac lagging all market the end of 1997, Fannie Mae had financed $1 million increase in the number of participants during 1997 and 1998 holds up billion in CRA loans through this pilot.86 homeowners between 1994 and 1999. for all of the borrower and neighborhood With billions of dollars worth of CRA loans Minority demand for homeownership categories examined in Table A.1a. One in bank portfolios the market for continues to be high, as reported by the encouraging trend for Freddie Mac is the securitization should improve. Section E, Fannie Mae Foundation’s April 1998 Survey significant increases in its purchases of below, presents data showing that Fannie of African Americans and Hispanics. For affordable loans between 1997 and 1999—for Mae’s purchases of CRA-type seasoned example, 38 percent of African Americans example, from 19.2 percent to 24.5 percent mortgages have increased recently. Fannie surveyed said it is fairly to very likely that for low-income borrowers, resulting in Mae also started another pilot program in they will buy a home in the next 3 years, Freddie Mac surpassing Fannie Mae in the 1998 where they purchase CRA loans on a compared with 25 percent in 1997.89 The funding of home loans for low-income flow basis, as they are originated. Results survey also reports that 67 percent of African families. With respect to the GSEs’ total from this four-year $2 billion nationwide Americans and 65 percent of Hispanics cite (combined home purchase and refinance) pilot should begin to be reflected in the 1999 homeownership as being a ‘‘very important purchases, Freddie Mac matched or out- production data.87 priority’’ or ‘‘number-one priority.’’ 90 performed Fannie Mae in 1999 on all c. Potential Homebuyers The Joint Center for Housing Studies has categories in Table A.1b except minority stated that if favorable economic and housing While the growth in affordable lending and borrowers. A more complete analysis of the market trends continue, and if additional homeownership has been strong in recent GSEs’ purchases of mortgages qualifying for efforts to target mortgage lending to low- years, attaining this Nation’s housing goals the housing goals is provided below in income and minority households are made, will not be possible without tapping into the Section E. the homeownership rate could reach 70 vast pool of potential homebuyers. The Finally, within the conventional percent by 2010. National Homeownership Strategy has set a conforming market, depository institutions goal of achieving a homeownership rate of d. Automated Mortgage Scoring stand out as important providers of 67.5 percent by the end of the year 2000. Due This, and the following two sections, affordable lending for lower-income families 82 to the aging of the baby boomers, this rate discuss special topics that have impacted the and their neighborhoods (see Table A.1a). reached an annual record of 66.8 percent in primary and secondary mortgage markets in Depository lenders have extensive knowledge 1999, and rose further to 67.1 percent in the recent years. They are automated mortgage of their communities and direct interactions first quarter of 2000. This section discusses scoring, subprime loans and manufactured with their borrowers, which may enable them the potential for further increases beyond housing. to introduce flexibility into their those resulting from current demographic Automated mortgage scoring was underwriting standards without unduly trends. developed as a high-tech tool with the increasing their credit risk. Another The Urban Institute estimated in 1995 that purpose of identifying credit risks in a more important factor influencing the types of there was a large group of potential efficient manner. As time and cost are loans held by depository lenders is the homebuyers among the renter population reduced by the automated system, more time Community Reinvestment Act, which is who were creditworthy enough to qualify for can be devoted by underwriters to qualifying discussed next. homeownership.88 Of 20.3 million renter marginal loan applicants that are referred by Seasoned CRA Loans. The Community households having low- or moderate- the automated system for more intensive Reinvestment Act (CRA) requires depository incomes, roughly 16 percent were better review. Fannie Mae and Freddie Mac are in institutions to help meet the credit needs of qualified for homeownership than half of the the forefront of new developments in their communities. CRA provides an renter households who actually did become automated mortgage scoring technology. Both incentive for lenders to initiate affordable homeowners over the sample period. When enterprises released automated underwriting lending programs with underwriting one also considered their likelihood of systems in 1995—Freddie Mac’s Loan flexibility.83 CRA loans are typically made to defaulting relative to the average expected for Prospector and Fannie Mae’s Desktop low- and moderate-income borrowers earning those who actually moved into Underwriter. Each system uses numerical less than 80 percent of median income for homeownership, 10.6 percent, or 2.15 credit scores, such as those developed by their area, and in moderate-income million, low- and moderate-income renters Fair, Isaac, and Company, and additional neighborhoods. They are usually smaller were better qualified for homeownership, data submitted by the borrower, such as loan- than typical conventional mortgages and also assuming the purchase of a home priced at to-value ratios and available assets, to are likely to have a high LTV, high debt-to- or below median area home price. These calculate a mortgage score that evaluates the income ratios, no payment reserves, and may results indicate the existence of a significant likelihood of a borrower defaulting on the not be carrying private mortgage insurance lower-income population of low-risk loan. The mortgage score is in essence a (PMI). Generally, at the time CRA loans are potential homebuyer households that might recommendation to the lender to accept the originated, many do not meet the become homeowners with continuing application, or to refer it for further review underwriting guidelines required in order for outreach efforts by the mortgage industry. through manual underwriting. Accepted them to be purchased by one of the GSEs. Other surveys conducted by Fannie Mae loans benefit from reduced document Therefore, many of the CRA loans are held indicate that renters desire to become requirements and expedited processing. in portfolio by lenders, rather than sold to homeowners, with 60 percent of all renters Along with the promise of benefits, Fannie Mae or Freddie Mac. On average, CRA indicating in the July 1998 National Housing however, automated mortgage scoring has loans in a pool have three to four years Survey that buying a home ranks from being raised concerns. These concerns are related seasoning.84 a ‘‘very important priority’’ to their ‘‘number- to the possibility of disparate impact and the However, because of the size, LTV and PMI one priority,’’ the highest level found in any proprietary nature of the mortgage score characteristics of CRA loans, they have of the seven National Housing Surveys dating inputs. The first concern is that low-income
VerDate 112000 18:02 Oct 30, 2000 Jkt 194001 PO 00000 Frm 00062 Fmt 4701 Sfmt 4700 E:\FR\FM\31OCR2.SGM pfrm08 PsN: 31OCR2 Federal Register / Vol. 65, No. 211 / Tuesday, October 31, 2000 / Rules and Regulations 65105 and minority homebuyers will not score well characteristics. From this, they concluded analyses of the effects of credit scoring enough to be accepted by the automated that concerns about potential disparate systems using a set of ‘‘fictitious borrower underwriting system resulting in fewer impact merit future study. However, a profiles’’ that would reveal how the systems getting loans. The second concern relates to disparate impact study must include a reflect borrower differences in income, work the ‘‘black box’’ nature of the scoring business justification analysis to demonstrate history, credit history, and other relevant algorithm. The scoring algorithm is the ability of the score card to predict factors. HUD has begun following up on the proprietary and therefore it is difficult, if not defaults and an analysis of whether any Urban Institute’s recommendations. For impossible, for applicants to know the alternative, but equally-predictive, score card instance, in February 1999, HUD requested reasons for their scores. has a less disproportionate effect. the information and data needed to analyze Federal Reserve Study. Four economists at Urban Institute Study. The Urban Institute the GSEs’ automated underwriting systems. the Board of Governors of the Federal submitted a report to HUD in 1999 on a four- Concluding Observations. It is important to Reserve System conducted a conceptual and city reconnaissance study of issues related to note that both of the studies reviewed above empirical study on the use of credit scoring the single-family underwriting guidelines comment on the problem of correlation of systems in mortgage lending.91 Their broad and practices of Fannie Mae and Freddie valid predictors of default (income, etc.) with assessment of the models was that: Mac.93 The study included interviews with protected factors (race, etc.). Both studies ‘‘[C]redit scoring is a technological informants knowledgeable about mortgage suggest that, ultimately, the question whether innovation which has increased the speed markets and GSE business practices on the mortgage credit scoring models raise any and consistency of risk assessment while national level and in the four cities. problems of legal discrimination based on reducing costs. Research has uniformly The study observed, as did the Fed study disparate effects would hinge on a business found that credit history scores are summarized above, that minorities are more necessity analysis and analysis of whether powerful predictors of future loan likely than whites to fail underwriting any alternative underwriting procedures with performance. All of these features suggest guidelines. Therefore, as a general matter the less adverse disproportionate effect exist. that credit scoring is likely to benefit both GSEs’ underwriting guidelines—as well as It should be noted that the GSEs have taken lenders and consumers.’’ 92 the underwriting guidelines of others in the steps to make their automated underwriting systems more transparent. Both Fannie Mae The authors evaluated the current state-of- industry—do have disproportionate adverse 94 and Freddie Mac have published the factors the-art of development of credit scoring effects on minority loan applicants. used to make loan purchase decisions in models, focusing particularly on the Based on the field reconnaissance in four Desktop Underwriter and Loan Prospector, comprehensiveness of statistical information metropolitan housing markets, the study respectively. The three most predictive used to develop the scoring equations. They made several observations about the factors are down payment, credit presented a conceptual framework in which operation of credit scoring systems in 95 performance or bureau score, and financial statistical predictors of default include practice, as follows: • cushion. regional and local market conditions, Credit scores are used in mortgage In response to criticisms aimed at using individual credit history, and applicants’ underwriting to separate loans that must be FICO scores in mortgage underwriting, characteristics other than credit history. The referred to loan underwriters from loans that Fannie Mae’s new version of Desktop authors observed that the developers of credit may be forwarded directly to loan officers; Underwriter (DU) 5.0 replaces credit scores scoring models have tended to disregard for example, a 620 score was mentioned by with specific credit characteristics and regional and local market conditions in some respondents as the line below which provides expanded approval product model construction, and such neglect may the loan officer must refer the loan for offerings for borrowers who have blemished tend to reduce the predictive accuracy of manual underwriting. It is very difficult for credit. The specific credit characteristics scoring equations. To determine the extent of applicants with low credit scores to be include variables such as past delinquencies; the problem, they analyzed Equifax credit approved for a mortgage, according to the credit records, foreclosures, and accounts in scores together with mortgage payment lenders interviewed by the Urban Institute. collection; credit card line and use; age of history data for households living in each of • Some respondents believe the GSEs are accounts; and number of credit inquiries. 994 randomly selected counties from across applying cutoffs inflexibly, while others the country. The authors used these data to believe that lenders are not taking advantage e. Subprime Loans assess the variability of credit scores relative of flexibility allowed by the GSEs. • Another major development in housing to county demographic and economic Some respondents believe that credit finance has been the recent growth in characteristics. scores may not be accurate predictors of loan subprime loans. In the past borrowers The authors found a variety of pieces of performance, despite the claims of users of traditionally obtained an ‘‘A’’ quality (or evidence which confirmed their suspicions: these scores. Respondents who voiced this ‘‘investment grade’’) mortgage or no Credit scores tended to be relatively lower in opinion tended to base these observations on mortgage. However, an increasing share of counties with relatively high unemployment their personal knowledge of low-income recent borrowers have obtained ‘‘subprime’’ rates, areas that have experienced recent rises borrowers who are able to keep current on mortgages, with their quality denoted as ‘‘A- in unemployment rates, areas with high payments, rather than on an understanding of minus,’’ ‘‘B,’’ ‘‘C,’’ or even ‘‘D.’’ The minority population, areas with lower statistical validation studies of the models. subprime borrower typically is someone who • median educational attainment, areas with Respondents indicate that the ‘‘black has experienced credit problems in the past high percentages of individuals living in box’’ nature of the credit scoring process or has a high debt-to-income ratio.96 Through poverty, areas with low median incomes and creates uncertainty among loan applicants the first nine months of 1998, ‘‘A-minus’’ low house values, and areas with relatively and enhances the intimidating nature of the loans accounted for 63 percent of the high proportions of younger populations and process for them. subprime market, with ‘‘B’’ loans lower proportions of older residents. Based on these findings, the authors representing 24 percent and ‘‘C’’ and ‘‘D’’ This analysis suggests the need for a two- concluded that ‘‘the use of automated loans making up the remaining 13 percent.97 step process of improvement of the equations underwriting systems and credit scores may Because of the perceived higher risk of and their application, in which (a) new place lower-income borrowers at a default, subprime loans typically carry statistical analyses would be performed to disadvantage when applying for a loan, even mortgage rates that in some cases are incorporate the omitted environmental though they are acceptable credit risks.’’ substantially higher than the rates on prime variables, and (b) additional variables bearing The Urban Institute report included several mortgages. While in many cases these on individuals’ prospective and prior recommendations for ongoing HUD perceptions about risk are accurate, some circumstances will be taken into account in monitoring of the GSEs’ underwriting housing advocates have expressed concern determining their credit scores. including their use of credit scoring models. that there are a number of cases in which the These authors also discussed the One suggestion was to develop a data base on perceptions are actually not accurate. The relationship between credit scoring and the GSEs’ lending activities relevant for Community Reinvestment Association of discrimination. They found a significant analysis of fair lending issues. The data North Carolina (CRA–NC), conducted a study statistical relationship between credit history would include credit scores to reveal the based on HMDA data, records of deeds, and scores and minority composition of an area, GSEs’ patterns of loan purchase by credit personal contacts with affected borrowers in after controlling for other locational score. A second suggestion was to conduct Durham County, NC. They found that
VerDate 112000 18:02 Oct 30, 2000 Jkt 194001 PO 00000 Frm 00063 Fmt 4701 Sfmt 4700 E:\FR\FM\31OCR2.SGM pfrm08 PsN: 31OCR2 65106 Federal Register / Vol. 65, No. 211 / Tuesday, October 31, 2000 / Rules and Regulations subprime lenders make proportionally more the 1990s. Both GSEs now purchase A-minus that the GSEs will purchase, the difference loans to minority borrowers and in minority and Alt-A mortgages on a flow basis.102 The between the prime and subprime markets neighborhoods than to whites and white GSEs’ interest in the subprime market has will become less clear. This melding of neighborhoods at the same income level. coincided with a maturation of their markets could occur even if many of the African-American borrowers represented 20 traditional market (the conforming underlying characteristics of subprime percent of subprime mortgages in Durham conventional mortgage market), and their borrowers and the market’s (i.e., non-GSE County, but only 10 percent of the prime development of mortgage scoring systems, participants) evaluation of the risks posed by market.98 As a result, these borrowers can which they believe allows them to accurately these borrowers remain unchanged. end up paying very high mortgage rates that model credit risk. Increased involvement by the GSEs in the more than compensate for the additional Freddie Mac has been the more aggressive subprime market might result in more risks to lenders. High subprime mortgage GSE in the subprime market. In early 1996, standardized underwriting guidelines. As the rates make homeownership more expensive Freddie Mac stated that its interest in subprime market becomes more or force subprime borrowers to buy less subprime loans was for the development of standardized, market efficiencies might desirable homes than they would be able to a subprime module for Loan Prospector possibly reduce borrowing costs. Lending to purchase if they paid lower prime rates on (Freddie Mac’s automated underwriting credit-impaired borrowers will, in turn, their mortgages. system), a joint project with Standard & increasingly make good business sense for The HMDA database does not provide Poor’s to score subprime mortgages.103 the mortgage market. information on interest rates, points, or other Freddie Mac increased its subprime business f. Loans on Manufactured Housing loan terms that would enable researchers to through structured transactions, with Freddie separate more expensive subprime loans Mac guaranteeing the senior classes of Manufactured housing provides low-cost, from other loans. However, the Department senior/subordinated securities backed by basic-quality housing for millions of has identified 200 lenders that specialize in home equity loans. Between 1997 and 1999, American households, especially younger, such loans, providing some information on Freddie Mac was involved in 16 transactions lower-income families in the South, West, the growth of this market.99 This data shows totaling $8.1 billion, with Freddie Mac’s 1999 and rural areas of the nation. Many that mortgages originated by subprime business accounting for over $5 billion of this households live in manufactured housing lenders, and reported in the HMDA data, has total.104 During 1999, Freddie Mac did four because they simply cannot afford site-built homes, for which the construction cost per increased from 104,000 subprime loans in transactions with Option One Mortgage, square foot is much higher. Because of its 1993 to 210,000 in 1995 and 997,000 in 1998. including its largest subprime deal to date, affordability to lower-income families, Most of the subprime loans reported in the $930.4 million, in November of that year. manufactured housing is one of the fastest- HMDA data are refinance loans; for example, Freddie Mac also offers a product for A- growing parts of the American housing refinance loans accounted for 80 percent of minus borrowers through its Loan Prospector market.109 the subprime loans reported by the system and it recently announced a product The American Housing Survey found that specialized subprime lenders in 1997. similar to the ‘‘Timely Payment Rewards’’ 16.3 million people lived in 6.5 million An important question is whether mortgage offered by Fannie Mae. In total, manufactured homes in the United States in borrowers in the subprime market are Freddie Mac purchased approximately $12 1997, and that such units accounted for 6.6 sufficiently creditworthy to qualify for more billion in subprime loans during 1999—$7 percent of the occupied housing stock, an traditional loans. Freddie Mac has said that billion of A-minus and alternative-A loans increase from 5.4 percent in 1985. Shipments one of the promises of automated through its standard flow programs and $5 105 of manufactured homes rose steadily from underwriting is that it might be better able to billion through structured transactions. 171,000 units in 1991 to 373,000 units in identify borrowers who are unnecessarily Freddie Mac is projecting to increase its 1998, before tailing off to 348,000 units in assigned to the high-cost subprime market. It subprime purchases to $17.5 billion in the 1999. The industry grew much faster over has estimated that 10–30 percent of year 2000, consisting of $9.5 billion in this period in sales volume, from $4.7 billion borrowers who obtain mortgages in the subprime flow purchases and $8.0 billion in in 1991 to $15.3 billion in 1999, reflecting 106 subprime market could qualify for a security purchases. both higher sales prices and a major shift conventional prime loan through Loan Fannie Mae has not focused on structured from single-section homes to multisection Prospector, its automated underwriting transactions as Freddie Mac has. However, homes, which contain two or three units 100 system. Fannie Mae initiated its Timely Payments which are joined together on site.110 Most of the subprime loans that were product in September 1999, under which Despite their eligibility for mortgage purchased by the GSEs in past years were borrowers with slightly damaged credit can financing, only about 10–20 percent of purchased through structured transactions. qualify for a mortgage with a higher interest manufactured homes 111 are financed with Under this form of transaction, whole groups rate than prime borrowers. Under this mortgages secured by the property, even of loans are purchased, and not all loans product, a borrower’s interest rate will be though half of owners hold title to the land necessarily meet the GSEs’ traditional reduced by 100 basis points if the borrower on which the home is sited. Most purchasers underwriting guidelines. The GSEs typically makes 24 consecutive monthly payments of manufactured homes take out a personal guarantee the so-called ‘‘A’’ tranche, which is without a delinquency. Fannie Mae has property loan on the home and, if they buy supported by a ‘‘B’’ tranche that covers revamped its automated underwriting system the land, a separate loan to finance the default costs. (Desktop Underwriter) so loans that were purchase of the land. An expanded GSE presence in the traditionally referred for manual In 1995, the average loan size for a subprime market could be of significant underwriting are now given four risk manufactured home was $24,500, with a 15 benefit to lower-income families, minorities, classifications, three of which identify percent down payment and term of 13 years. and families living in underserved areas. potential A-minus loans.107 Rates averaged about 3 percentage points HUD’s research shows that in 1998: African- Because the GSEs have a funding higher than those paid on 15-year fixed rate Americans comprised 5.0 percent of market advantage over other market participants, mortgages, but borrowers benefit from very borrowers, but 19.4 percent of subprime they have the ability to underprice their rapid loan-processing and underwriting borrowers; Hispanics made up 5.2 percent of competitors and increase their market standards that allow high debt payment-to- market borrowers, but 7.8 percent of share.108 This advantage, as has been the case income (‘‘back-end’’) ratios. subprime borrowers; very low-income in the prime market, could allow the GSEs Traditionally loans on manufactured borrowers accounted for 12.1 percent of to eventually play a significant role in the homes have been held in portfolio, but a market borrowers, but 23.3 percent of subprime market. As the GSEs become more secondary market has emerged since trading subprime borrowers; and borrowers in comfortable with subprime lending, the line of asset-backed securities collateralized by underserved areas amounted to 24.8 percent between what today is considered a subprime manufactured home loans was initiated in of market borrowers, but 44.7 percent of loan versus a prime loan will likely 1987. Investor interest has been reported as subprime borrowers.101 deteriorate, making expansion by the GSEs strong due to reduced loan losses, low The GSEs. Fannie Mae and Freddie Mac look more like an increase in the prime prepayments, and eligibility for packaging of have shown increasing interest in the market. Since, as explained earlier in this such loans into real estate mortgage subprime market throughout the latter half of chapter, one could define a prime loan as one investment conduits (REMICs). The GSEs’
VerDate 112000 18:02 Oct 30, 2000 Jkt 194001 PO 00000 Frm 00064 Fmt 4701 Sfmt 4700 E:\FR\FM\31OCR2.SGM pfrm08 PsN: 31OCR2 Federal Register / Vol. 65, No. 211 / Tuesday, October 31, 2000 / Rules and Regulations 65107 underwriting standards allow them to buy The affordable housing issues go beyond of long-term, fixed-rate financing jeopardizes loans on manufactured homes that meet the the need for greater efficiency in delivering the viability of a number of some properties. HUD construction code, if they are owned, capital to the rental housing market. In many There is evidence that financing for new titled, and taxed as real estate. cases, subsidies are needed in order for low- construction remains scarce.120 Both Fannie The GSEs are beginning to expand their income families to afford housing that meets Mae and Freddie Mac offer Senior Housing roles in the manufactured home loan adequate occupancy and quality standards. pilot programs. market.112 A representative of the Nevertheless, greater access to reasonably Under circumstances where mortgage Manufactured Housing Institute has stated priced capital can reduce the rate of losses financing is difficult, costly, or inconsistent, that ‘‘Clearly, manufactured housing loans to the stock, and can help finance the GSE intervention may be desirable. Follain would fit nicely into Fannie Mae’s and development of new or rehabilitated and Szymanoski (1995) say that ‘‘a [market] Freddie Mac’s affordable housing goals.’’ 113 affordable housing when combined with failure occurs when the market does not Given that manufactured housing loans often locally funded subsidies. Development of a provide the quantity of a particular good or carry relatively high interest rates, an secondary market for affordable housing is service at which the marginal social benefits enhanced GSE role could also improve the one of many tools needed to address these of another unit equal the marginal social affordability of such loans to lower-income issues. costs of producing that unit. In such a families. Recent scholarly research suggests that situation, the benefits to society of having D. Factor 2: Economic, Housing, and more needs to be done to develop the one more unit exceeds the costs of producing Demographic Conditions: Multifamily secondary market for affordable multifamily one more unit; thus, a rationale exists for 117 Mortgage Market housing. Cummings and DiPasquale (1998) some level of government to intervene in the point to the numerous underwriting, pricing, market and expand the output of this Since the early 1990s, the multifamily and capacity building issues that impede the good.’’121 It can be argued that the GSEs have mortgage market has become more closely development of this market. They suggest the the potential to contribute to the mitigation integrated with global capital markets, impediments can be addressed through the of difficult, costly, or inconsistent availability approaching the same degree as the single- establishment of affordable lending of mortgage financing to segments of the family mortgage market by the end of the standards, better information, and industry multifamily market because of their funding decade. In 1999, 58.8 percent of multifamily leadership. cost advantage, and even a responsibility to mortgage originations were securitized, • More consistent standards are especially do so as a consequence of their public compared with 60.8 percent of single-family needed for properties with multiple layers of missions, especially in light of the limitations originations.114 subordinated financing (as is often the case on direct government resources available to Loans on multifamily properties are with affordable properties allocated Low multifamily housing in today’s budgetary typically viewed as riskier than their single- Income Housing Tax Credits and/or local environment. family counterparts. Property values, vacancy subsidies). rates, and market rents in multifamily • More comprehensive and accurate 3. Recent History and Future Prospects in properties appear to be highly correlated information, particularly with regard to the Multifamily with local job market conditions, creating The expansion phase of the real estate greater sensitivity of loan performance to determinants of default, can help in setting cycle been well underway for several years economic conditions than may be standards for affordable lending. • now, at least insofar as it pertains to experienced in the single-family market. Leadership from the government or from multifamily. Rental rates have been rising, Within much of the single-family mortgage a GSE is needed to develop consensus and vacancy rates have been relatively stable, market, the GSEs occupy an undisputed standards; it would be unprofitable for any contributing to a favorable environment for position of industrywide dominance, holding single purely private lender to provide multifamily construction and lending loans or guarantees with an unpaid principal because costs would be borne privately but activity.122 Delinquencies on commercial comprising 39.0 percent of outstanding competitors would benefit. mortgages reached an 18-year low in 1997.123 single-family mortgage debt and guarantees 2. Underserved Market Segments Some analysts have warned that recent as of the end of 1999. In multifamily, the overall market presence of the GSEs is more There is evidence that segments of the prosperity may have contributed to multifamily housing stock have been affected overbuilding in some markets and modest. At the end of 1999, the GSEs’ direct 124 holdings and guarantees represented 17.3 by costly, difficult, or inconsistent deterioration in underwriting standards. A percent of outstanding multifamily mortgage availability of mortgage financing. Small September 1998, report by the Office of the debt.115 It is estimated that GSE acquisitions properties with 5–50 units represent an Comptroller of the Currency anticipates of multifamily loans originated during 1997 example. The fixed-rate financing that is continued decline in credit standards at the represented 24 percent of the conventional available is typically structured with a 5–10 77 largest national banks as a consequence of multifamily origination market.116 year term, with interest rates as much as 150 heightened competition between lenders, and basis points higher than those on standard the Federal Deposit Insurance Corporation 1. Special Issues and Unmet Needs multifamily loans, which may have adverse has expressed similar concerns regarding Recent studies have documented a pressing implications for affordability.118 This market 1,212 banks it examined.125 unmet need for affordable housing. For segment appears to be dominated by thrifts Growth in the multifamily mortgage market example, the Harvard University Joint Center and other depositories who keep these loans has been fueled by investor appetites for for Housing Studies, in its report State of the in portfolio. In part to hedge interest rate risk, Commercial Mortgage Backed Securities Nation’s Housing 2000, points out that: loans on small properties are often structured (CMBS). Nonagency securitization of • Despite recent job and income growth, as adjustable-rate mortgages. multifamily and commercial mortgages renters in the bottom quarter of the income Multifamily properties with significant received an initial impetus from the sale of distribution experienced a decline in real rehabilitation needs have experienced nearly $20 billion in mortgages acquired by income from 1996–1998, at a time when real difficulty in obtaining mortgage financing. the Resolution Trust Corporation (RTC) from rents increased by 2.3 percent. Properties that are more than 10 years old are insolvent depositories in 1992–1993. • Between 1993 and 1995, the number of typically classified as ‘‘C’’ or ‘‘D’’ properties, Nonagency issuers typically enhance the unsubsidized units affordable to very low- and are considered less attractive than newer credit-worthiness of their offerings through income households decreased by nearly properties by many lenders and investors.119 the use of senior-subordinated structures, 900,000 units, or 8.6 percent. Multifamily rehabilitation loans accounted combining investment-grade senior tranches • One-quarter of very low-income working for only 0.5 percent of units backing Fannie with high-yield, below investment-grade households paid 30 percent or more of their Mae’s 1998 purchases and for 1.6 percent in junior tranches designed to absorb any credit incomes for housing. 1999. These loans accounted for 1.9 percent losses.126 • Rising home prices and interest rates are of Freddie Mac’s 1998 multifamily total (with Because of their relatively low default risk raising the cost of homeownership. none indicated in 1999). in comparison with loans on other types of • Reductions in federal subsidies may Historically, the flow of capital into income property, multifamily mortgages are contribute to further losses in the affordable housing for seniors has been characterized by often included in mixed-collateral financing stock. a great deal of volatility. A continuing lack structures including other commercial
VerDate 112000 18:02 Oct 30, 2000 Jkt 194001 PO 00000 Frm 00065 Fmt 4701 Sfmt 4700 E:\FR\FM\31OCR2.SGM pfrm08 PsN: 31OCR2 65108 Federal Register / Vol. 65, No. 211 / Tuesday, October 31, 2000 / Rules and Regulations property such as office buildings, shopping Past experience suggests that the great majority of rental units are affordable to centers, and storage warehouses. CMBS availability of financing for all forms of families at 100 percent of median income, the volume reached $30 billion in 1996; $44 commercial real estate is highly sensitive to standard upon which the Low- and billion in 1997; $78 billion in 1998; and $67 the state of the economy. In periods of Moderate-Income Housing Goal is defined. billion in 1999. Approximately 25 percent of economic uncertainty, lenders and investors For example, 38.5 percent of units securing each year’s total is comprised of multifamily sometimes raise underwriting and credit Freddie Mac’s 1999 single-family, one-unit loans.127 standards to a degree that properties that owner-occupied mortgage purchases met the During the financial markets turmoil in the would be deemed creditworthy under normal Low- and Moderate-Income Housing Goal, fall of 1998, investors expressed reluctance to circumstances are suddenly unable to obtain compared with 90.0 percent of its purchase the subordinated tranches in CMBS financing. Ironically, difficulty in obtaining multifamily transactions. Corresponding transactions, jeopardizing the ability of financing may contribute to a fall in property figures for Fannie Mae were 37.9 percent and issuers to provide a cost-effective means of values that can exacerbate a credit crunch.136 94.8 percent. 141 For this reason, multifamily credit-enhancing the senior tranches as The sensitivity of commercial real estate purchases represent a crucial component of well.128 When investor perceptions regarding markets to investor perceptions regarding the GSEs’ efforts in meeting the Low- and credit risk on subordinated debt escalated global volatility was demonstrated by the rise Moderate-Income Housing Goal. rapidly in August and September, the GSEs, in CMBS spreads in September, 1998.137 Because such a large proportion of which do not typically use subordination as Thus, market disruptions could have adverse multifamily units qualify for the Low- and a credit enhancement, benefited from a implications on U.S. commercial and Moderate-Income Housing Goal and for the ‘‘flight to quality.’’ 129 residential mortgage markets. Special Affordable Housing Goal, Freddie Depository institutions and life insurance Mac’s weaker multifamily performance companies, formerly among the largest 4. Recent Performance and Effort of the GSEs adversely affects its overall performance on holders of multifamily debt, have Toward Achieving the Low- and Moderate- these two housing goals relative to Fannie experienced a decline in their share of the Income Housing Goal: Role of Multifamily Mae. Units in multifamily properties market at the expense of CMBS conduits.130 Mortgages accounted for 7.2 percent of Freddie Mac’s Increasingly, depositories and life insurance The GSEs have rapidly expanded their mortgage purchases during 1994–1999, companies are participating in multifamily presence in the multifamily mortgage market compared with 11.8 percent for Fannie Mae. markets by holding CMBS rather than whole in the period since the housing goals were Fannie Mae’s greater emphasis on loans, which are often less liquid, more established in 1993. Fannie Mae has played multifamily is a major factor contributing to expensive, and subject to more stringent risk- a larger role in the multifamily market, with the strength of its housing goals performance based capital standards.131 In recent years a a portfolio of $47.4 billion in retained loans relative to Freddie Mac. rising proportion of multifamily mortgages and outstanding guarantees, compared with have been originated to secondary market $16.8 billion for Freddie Mac.138 Freddie Mac 5. A Role for the GSEs in Multifamily standards, a consequence of a combination of has successfully rebuilt its multifamily Housing factors including the establishment of a program after a three-year hiatus during By sustaining a secondary market for smoothly functioning securitization 1991–1993 precipitated by widespread multifamily mortgages, the GSEs can extend ‘‘infrastructure;’’ the greater liquidity of defaults. the benefits that come from increased mortgage-related securities as compared with Multifamily loans represent a relatively mortgage liquidity to many more lower- whole loans; and the desire for an ‘‘exit small portion of the GSEs’ business activities. income families while helping private strategy’’ on the part of investors.132 For example, multifamily loans held in owners to maintain the quality of the existing Because of their limited use of mortgage portfolio or guaranteed by the GSEs at the affordable housing stock. In addition, debt, increased equity ownership of end of 1999 represented less than three standardization of underwriting terms and multifamily properties by REITs may have percent of their combined single- and multi- loan documents by the GSEs has the contributed to increased competition among family holdings and guarantees. In potential to reduce transactions costs. As the mortgage originators, servicers and investors comparison, multifamily mortgages not held GSEs gain experience in areas of the for a smaller mortgage market than would or guaranteed by the GSEs represent multifamily mortgage market affected by otherwise exist. During the first quarter of approximately ten percent of the overall non- costly, difficult, or inconsistent access to 1997, REITs accounted for 45 percent of all GSE stock of mortgage debt. secondary markets, they gain experience that commercial real estate transactions, and the However, the multifamily market enables them to better measure and price market capitalization of REITs at the end of contributes disproportionately to GSE default risk, yielding greater efficiency and January 1998 exceeded that of outstanding purchases meeting both the Low- and further cost savings. CMBS.133 Moderate-Income and Special Affordable Ultimately, greater liquidity, stability, and Demographic factors will contribute to Housing goals. In 1999, Fannie Mae’s efficiency in the secondary market due to a continued steady growth in the new multifamily purchases represented 9.5 significant presence by the GSEs will benefit construction segment of the multifamily percent of their total acquisition volume, lower-income renters by enhancing the mortgage market. The number of apartment measured in terms of dwelling units. Yet availability of mortgage financing for households is expected to grow these multifamily purchases comprised 20.4 affordable rental units—in a manner approximately 1.1 percent per year over percent of units qualifying for the Low- and analogous to the benefits the GSEs provide 2000–2005. Taking into consideration losses Moderate-Income Housing Goal, and 31.3 homebuyers. Providing liquidity and stability from the housing stock, it has been projected percent of units meeting the Special is the main role for the GSEs in the that approximately 250,000–275,000 Affordable goal. Multifamily purchases were multifamily market, just as in the single- additional multifamily units will be needed 8.2 percent of units backing Freddie Mac’s family market. in order to meet anticipated demand.134 This 1999 acquisitions, 16.8 percent of units Recent volatility in the CMBS market flow is approximately half that of the mid- meeting the Low- and Moderate-Income underlines the need for an ongoing GSE 1980s, but twice that of the depressed early Housing Goal, and 21.6 percent of units presence in the multifamily secondary 1990s. In 1999, 291,800 apartment units were qualifying for the Special Affordable Housing market. The potential for an increased GSE completed. 135 Goal.139 The multifamily market therefore presence is enhanced by virtue of the fact The high degree of volatility of multifamily comprises a significant share of units meeting that an increasing proportion of multifamily new construction experienced historically is the Low- and Moderate-Income and Special mortgages are originated to secondary market consistent with a view that this sector of the Affordable Housing Goals for both GSEs, and standards, as noted previously. While the housing market is driven more by the goals may have contributed to increased GSEs have also been affected by the widening fluctuations in the availability of financing emphasis by both GSEs on multifamily in the of yield spreads affecting CMBS, historical than by demographic fundamentals. The period since the previous final rule took experience suggests that agency spreads will stability and liquidity of the housing finance effect in 1996.140 converge to historical magnitudes as a system is therefore a significant determinant The majority of units backing GSE consequence of the perceived benefits of of whether the volume of new construction multifamily transactions meet the Low- and federal sponsorship.142 When this occurs, the remains consistent with demand. Moderate-Income Housing Goal because the capability of the GSEs to serve and compete
VerDate 112000 18:02 Oct 30, 2000 Jkt 194001 PO 00000 Frm 00066 Fmt 4701 Sfmt 4700 E:\FR\FM\31OCR2.SGM pfrm08 PsN: 31OCR2 Federal Register / Vol. 65, No. 211 / Tuesday, October 31, 2000 / Rules and Regulations 65109 in the multifamily secondary market will be mortgages and guarantees outstanding as of multifamily mortgage industry has been fully enhanced.143 the end of 1999, $16.8 billion, are much exploited. In particular, the GSEs’ smaller than that Fannie Mae’s $47.4 billion, multifamily purchases do not appear to be 6. Multifamily Mortgage Market: GSEs’ not only in absolute terms, but also a Ability To Lead the Industry consistently contributing to mitigation of percentage of all mortgage holdings and excessive cost of mortgage financing facing Holding 12.8 percent of the outstanding guarantees. Freddie Mac’s multifamily small properties with 5–50 units. Based on stock of multifamily mortgage debt and holdings and guarantees are 2.1 percent of its data from the Survey of Residential Finance guarantees as of the end of 1999, Fannie Mae total, compared with 4.3 percent for Fannie showing that 39.4 percent of units in recently is regarded as an influential force within the Mae.144 However, Freddie Mac is credited mortgaged multifamily properties were in multifamily market. Its Delegated with rapidly rebuilding its multifamily properties with 5–49 units, it appears Underwriting and Servicing (DUS) program, operations since 1993. The GSEs’ ability to reasonable to assume that loans backed by in which Fannie Mae delegates underwriting lead the multifamily industry is discussed responsibilities to originators in return for a further below. small properties account for 39.4 percent of commitment to share in any default risk, now multifamily units financed each year. As a accounts for more than half its multifamily 7. GSEs’ Performance in the Multifamily share of units backing their multifamily acquisitions, and has been regarded as highly Mortgage Market transactions, however, GSE purchases of successful. GSE activity in the multifamily mortgage loans on small multifamily properties are Freddie Mac’s presence in the multifamily market has expanded rapidly since 1993, as typically less than 5 percent, and have never market is not as large as that of Fannie Mae. noted previously. However, it is not clear approached the estimated 39.4 percent Freddie Mac’s direct holdings of multifamily that the potential of the GSEs to lead the market share, as shown in Table A.2.
TABLE A.2.ÐGSE MULTIFAMILY TRANSACTIONS BY SIZE OF PROPERTY, 1994±1999 ACQUISITION YEAR
1994 1995 1996 1997 1998 1999
Fannie Mae: Small (5±50 units) ...... 8,717 45,488 5,838 8,111 64,753 12,351 As % Fannie Mae Multifamily Total ...... 3.9 19.3 2.1 3.2 16.5 4.2 Freddie Mac: Small (5±50 units) ...... 1,165 5,461 4,100 3,963 10,244 4,068 As % Freddie Mac Multifamily Total ...... 2.6 3.6 4.2 4.0 4.6 2.1 Source: GSE loan-level data.
In order to more usefully compare the Another area underserved by mortgage subsidiary of the Enterprise Foundation. GSEs with the market, it is desirable to markets, in which the GSEs have not Cummings and DiPasquale (1998) conclude supplement the data presented in Table A.2 demonstrated market leadership is that both initiatives had mixed results, by acquisition year with findings organized rehabilitation loans. Both GSEs’ relatively although the Fannie Mae/EMI pilot was more by year of origination. Based on HUD’s weak performance in the multifamily successful in a number of regards. The analysis of loans originated in 1997 and rehabilitation market segment is related to Freddie Mac/LIMAC initiative was acquired by the GSEs in 1997, 1998, and the fact that, since the inception of the suspended after two years with only one 1999, the GSEs have purchased loans backed interim housing goals in 1993, the great completed transaction, involving eight loans by 24 percent of units financed in the overall majority of units backing GSE multifamily with an aggregate loan amount of $4.6 conventional multifamily mortgage market in mortgage purchases have been in properties million. As of June, 1997, 15 transactions 1997, but their acquisitions of loans on small securing refinance loans with an established comprising $20.5 million had been multifamily properties have been only 2.3 payment history, in a proportion exceeding completed under the Fannie Mae/EMI pilot, 150 percent of such properties financed that 80 percent in some years. which is ongoing. year.145 The GSEs have been conservative in their Both programs suffered initially from 151 GSE multifamily acquisitions tend to approach to multifamily credit risk. HUD’s documentation requirements that borrowers involve larger properties than are typical for analysis of prospectus data indicates that the perceived as burdensome. Cummings and average loan-to-value (LTV) ratio on pools of the market as a whole.146 For example, the DiPasquale observe that ‘‘The smaller, seasoned multifamily mortgages securitized nonprofit, and CDC developers that these average number of units in Fannie Mae’s by Freddie Mac during 1995 through 1996 programs intended to bring to the market 1997 multifamily transactions was 163, with was 55 percent. In comparison, the average were unprepared, and perhaps unwilling or a corresponding figure of 158 for Freddie LTV on private-label multifamily conduit unable, to meet the high costs of Freddie Mac. Both of these averages are significantly transactions over 1995–1996 was 73 percent Mac’s and Fannie Mae’s due diligence higher than the overall market average of 33.4 based on HUD’s analysis of Commercial requirements.’’ units per property on 1995 originations Mortgage Backed Security data. Fannie Mae estimated from the HUD Property Owners utilizes a variety of credit enhancements to E. Factor 3: Performance and Effort of the 147 and Managers (POMS) survey. A factor further mitigate default risk on multifamily GSEs Toward Achieving the Low- and possibly contributing to the GSEs’ emphasis acquisitions, including loss sharing, recourse Moderate-Income Housing Goal in Previous on larger properties is the relatively high agreements, and the use of senior/ Years fixed multifamily origination costs, including subordinated debt structures.152 Freddie Mac This section first discusses each GSE’s appraisal, environmental review, and legal is less reliant on credit enhancements than is performance under the Low- and Moderate- fees typically required under GSE Fannie Mae, possibly because of a more Income Housing Goal over the 1993–99 underwriting guidelines.148 conservative underwriting approach.153 period. The data presented are ‘‘official A recent noteworthy development is The GSEs’ ambivalence historically results’’—i.e., they are based on HUD’s in- Fannie Mae’s announcement of a new regarding the perception of credit risk in depth analysis of the loan-level data product through its Delegated Underwriting lending on affordable multifamily properties submitted to the Department and the and Servicing (DUS) program for multifamily is evident with regard to pilot programs counting provisions contained in HUD’s properties with 5–50 units. Features include established in 1991 between Freddie Mac regulations in 24 CFR part 81, subpart B. As a streamlined underwriting process designed, and the Local Initiatives Managed Assets explained below, in some cases these in part, to reduce borrower costs for third- Corporation (LIMAC), a subsidiary of the ‘‘official results’’ differ from goal party reports; use of FICO scores to evaluate Local Initiatives Support Corporation (LISC), performance reported to the Department by borrower creditworthiness; and recourse to and in 1994 between Fannie Mae and the GSEs in their Annual Housing Activities the borrower in the event of default.149 Enterprise Mortgage Investments (EMI), a Reports.
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Following this analysis, the GSEs’ past performance over the past seven years but, on to compare Fannie Mae’s performance performance in funding low- and moderate- average, they have lagged the primary market relative to the primary market for 1999. income borrowers in the single-family in providing mortgage funds for lower- • A large percentage of the lower-income mortgage market is provided. Performance income borrowers and underserved loans purchased by the GSEs have relatively indicators for the Geographically-Targeted neighborhoods. This finding is based both on high down payments, which raises questions and Special Affordable Housing Goals are HUD’s analysis of GSE and HMDA data as about whether the GSEs are adequately also included in order to present a complete well as on numerous studies by academics meeting the needs of lower-income families picture in Appendix A of the GSEs’ funding and research organizations. who have little cash for making large down • of single-family mortgages that qualify for the The GSEs show very different patterns of payments. 156 three housing goals. In addition, the findings home loan lending. Through 1998, • A study by The Urban Institute of lender from a wide range of studies—employing Freddie Mac was less likely than Fannie Mae experience with the GSEs’ underwriting both quantitative and qualitative techniques to fund single-family home mortgages for standards finds that the enterprises have to analyze several performance indicators low-income families and their communities. stepped up their outreach efforts and have and conducted by HUD, academics, and However, this pattern did not continue in increased the flexibility in their underwriting major research organizations—are 1999. The percentages of Freddie Mac’s standards, to better accommodate the special summarized below. purchases through 1998 benefiting circumstances of lower-income borrowers. Organization and Main Findings. Section historically underserved families and their However, this study concludes that the GSEs’ E.1 reports the performance of Fannie Mae neighborhoods were also substantially less and Freddie Mac on the Low- and Moderate- than the corresponding shares of total market guidelines remain somewhat inflexible and Income Housing Goal. Section E.2 uses originations. Through 1998 Freddie Mac had that they are often hesitant to purchase HMDA data and the loan-level data that the not made much progress closing the gap affordable loans. Lenders also told the Urban GSEs provide to HUD on their mortgage between its performance and that of the Institute that Fannie Mae has been more purchases to compare the characteristics of overall home loan market. HMDA data to aggressive than Freddie Mac in market GSE purchases of single-family loans with analyze the affordable lending shares of the outreach to underserved groups, in offering the characteristics of all loans in the primary primary market in 1999 were not available at new affordable products, and in adjusting mortgage market and of newly-originated the time this appendix was prepared. But their underwriting standards. loans held in portfolio by depositories. since the GSEs are such major participants in • While single-family rental properties are Section E.3 summarizes the findings from the mortgage market, the fact that Freddie an important source of low-income rental several studies that have examined the role Mac surpassed Fannie Mae last year in many housing, they represent only a small portion of the GSEs in supporting affordable lending. dimensions of affordable lending suggests of the GSEs’ business. In addition, many of Section E.4 discusses the findings from a that they may well have narrowed the gap the single-family rental properties funded by recent HUD-sponsored study of the GSEs’ between their performance and that of the the GSEs are one-unit detached units in underwriting guidelines.154 Finally, Section primary market. suburban areas rather than the older, 2–4 E.5 reviews the GSEs’ support of the single- • Through 1998 Fannie Mae’s purchases units commonly located in urban areas. family rental market. more nearly matched the patterns of The Section’s main findings with respect to originations in the primary market than did 1. Past Performance on the Low- and the GSEs’ single-family mortgage purchases Freddie Mac’s. However, during the 1993–98 Moderate-Income Housing Goal are as follows: period as a whole and the 1996–98 period HUD’s goals specified that in 1996 at least • Both Fannie Mae and Freddie Mac during which the new goals were in effect, 40 percent of the number of units eligible to surpassed the Low- and Moderate-Income Fannie Mae lagged depositories and others in count toward the Low- and Moderate-Income Housing Goals of 40 percent in 1996 and 42 the conforming market in providing funding Goal should qualify as low-or moderate- percent in 1997–99. for the lower-income borrowers and income, and at least 42 percent should • Both Fannie Mae and Freddie Mac have neighborhoods covered by the three housing qualify in 1997–99. Actual performance, improved their affordable lending 155 goals. HMDA data are not currently available based on HUD’s analysis, was as follows:
1996 1997 1998 1999
Fannie Mae: Units Eligible to Count Toward Goal ...... 1,831,690 1,710,530 3,468,428 2,925,347 Low- and Moderate-Income Units ...... 834,393 782,265 1,530,308 1,530,308 Percent Low- and Moderate-Income ...... 45.6 45.7 44.1 45.9 Freddie Mac: Units Eligible to Count Toward Goal ...... 1,293,424 1,173,915 2,654,850 2,224,849 Low- and Moderate-Income Units ...... 532,219 499,590 1,137,660 1,024,660 Percent Low- and Moderate-Income ...... 41.1 42.6 42.9 46.1
Thus, Fannie Mae surpassed the goals by their Annual Housing Activity Reports to more steady gains in performance on the 5.6 percentage points and 3.7 percentage HUD by 0.2–0.3 percentage points in both Low- and Moderate-Income Goal, from 30.0 points in 1996 in 1997, respectively, while 1996 and 1997, reflecting minor differences percent in 1993 to 38.0 percent in 1994 and Freddie Mac surpassed the goals by 1.1 and in application of counting rules. These 39.6 percent in 1995, before surpassing 41 0.6 percentage points. In 1998 Fannie Mae’s differences also persisted for Freddie Mac for percent in 1996 and 42 percent 1997, and performance fell by 1.6 percentage points, 1998–99, but the goal percentages shown rising to nearly 43 percent in 1998 and to 46 while Freddie Mac’s reported performance above for Fannie Mae for these two years are percent last year. continued to rise, by 0.3 percentage point. the same as the results reported by Fannie Fannie Mae’s performance on the Low- and Freddie Mac showed a sharp gain in Mae to the Department. Moderate-Income Goal surpassed Freddie performance to 46.1 percent in 1999, Fannie Mae’s performance on the Low- and Mac’s in every year through 1998. This exceeding its previous high by 3.2 percentage Moderate-Income Goal jumped sharply in pattern was reversed last year, as Freddie points. Fannie Mae’s performance was also at just one year, from 34.1 percent in 1993 to a record level of 45.9 percent, which, for the 45.1 percent in 1994, before tailing off to 42.8 Mac surpassed Fannie Mae in goal first time, slightly lagged Freddie Mac’s percent in 1995. As indicated, it then performance for the first time, though by only performance. stabilized at the 1994 level, just over 45 0.2 percentage point. This improved relative The figures for goal performance presented percent, in 1996 and 1997, before tailing off performance of Freddie Mac is due to its above differ from the corresponding figures to 44.1 percent in 1998, but rose to 45.9 increased purchases of multifamily loans, as presented by Fannie Mae and Freddie Mac in percent last year. Freddie Mac has shown it re-entered that market, and to increases in
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However, the manufactured home of these issues will be discussed throughout mirror or depart from the patterns found in mortgage market is changing in ways that the appendices, one issue, the reliability of the primary mortgage market. The GSEs’ HMDA data in measuring GSE performance, affordable lending performance is also make a higher percentage of such loans eligible for purchase by the GSEs, and the needs to be addressed before presenting the compared with the performance of major market comparisons, which utilize the portfolio lenders such as commercial banks GSEs are looking for ways to increase their purchases of these loans. But more HMDA data. Fannie Mae, in particular, has and thrift institutions. Dimensions of lending raised questions about HUD’s reliance on considered include the borrower income and importantly, the manufactured housing sector is one of the most important providers HMDA data for measuring its performance. underserved area dimensions covered by the There are two sources of loan-level of affordable housing, which makes it three housing goals. In addition, this section information on the characteristics of appropriate to include this sector in the also analyzes Fannie Mae and Freddie Mac mortgages purchased by the GSEs—the GSEs purchases during 1999; however, market data market definition. As discussed earlier in themselves and HMDA data. The GSEs from HMDA were not available for 1999 at Section A.3c, HUD believes that excluding provide detailed data on their mortgage the time this analysis was prepared. important low-income sectors such as purchases to HUD on an annual basis. As Subsection a defines the primary mortgage manufactured housing from the market part of their annual HMDA reporting market, subsection b addresses some definition would render the resulting market responsibilities, lenders are required to questions that have recently arisen about benchmark useless for evaluating the GSEs’ indicate whether their new mortgage HMDA’s measurement of GSE activity, and performance. For comparison purposes, data 157 originations or purchased loans are sold to subsections c–e present the findings. are presented for the primary market defined Fannie Mae, Freddie Mac or some other The market analysis in this section is based both to include and exclude mortgages entity. As discussed later, there have been mainly on HMDA data for home purchase originated by manufactured housing lenders. numerous studies by HUD staff and other loans originated in metropolitan areas during researchers that use the HMDA data to the years 1992 to 1998. The discussion below This issue of the market definition is discussed further in Appendix D, which compare the borrower and neighborhood will often focus on the year 1997, as that year characteristics of loans sold to the GSEs with represents more typical mortgage market calculates the market shares for each housing goal. the characteristics of all loans originated in activity than the heavy refinancing year of the market. One question is whether the 1998. Still, important shifts in mortgage Questions have also arisen about whether subprime loans should be excluded when HMDA data, which is widely available to the funding that occurred during 1998 will be public, provides an accurate measure of GSE comparing the primary market with the highlighted in order to offer a complete performance, as compared with the GSEs’ analysis. GSEs. Appendix D, which examines this own data.164 Fannie Mae has argued that a. Definition of Primary Market issue in some detail, reports the effects of HMDA data have understated its past excluding the B&C portion of the subprime First it is necessary to define what is meant performance, where performance is defined market from HUD’s estimates of the goal- by ‘‘primary market’’ in making these as the percentage of Fannie Mae’s mortgage qualifying shares of the overall (combined comparisons. In this section this term purchases accounted for by one of the goal- owner and rental) mortgage market. As includes all mortgages on single-family qualifying categories such as underserved owner-occupied properties that are explained Section C.3.e of this appendix, the areas. As explained below, HMDA provided originated in the conventional conforming low-income and minority borrowers in the A- reliable national-level information through market.158 The source of this market minus portion of the subprime market could 1997 on the goals-qualifying percentages for information is the data provided by loan benefit from the standardization and lower the GSEs’ purchases of newly-originated originators to the Federal Financial interest rates that typically accompany an loans but not for their purchases of prior-year Institutions Examination Council (FFIEC) in active secondary market effort by the GSEs. loans. In 1998, HMDA data differed from data accordance with the Home Mortgage A-minus loans are not nearly as risky as B&C that the GSEs reported to HUD on their Disclosure Act (HMDA). loans and Freddie Mac has been purchasing purchases of newly-originated loans. There is a consensus that the following A-minus loans, both on a flow basis and In any given calendar year, the GSEs can loans should be excluded from the HMDA through negotiated transactions. Fannie Mae purchase mortgages originated in that data in defining the ‘‘primary market’’ for the recently introduced a new program targeted calendar year or mortgages originated in a sake of comparison with the GSEs’ purchases at A-minus borrowers. Thus, HUD does not prior calendar year. In 1997, purchases of of goal-qualifying mortgages: believe that A-minus loans should be prior-year mortgages accounted for 30 • Loans with a principal balance in excess excluded from the market definition. percent of the single-family units financed by of the loan limit for purchases by the GSEs— Unfortunately, HMDA does not identify Fannie Mae’s mortgage purchases and 20 $240,000 for a 1-unit property in most parts subprime loans, much less separating them percent of the single-family units financed by 159 Freddie Mac’s mortgage purchases.165 HMDA of the United States in 1999. Loans not in into their A-minus and B&C components. data provides information mainly on newly- excess of this limit are referred to as There is some evidence that many subprime originated mortgages that are sold to the ‘‘conforming mortgages’’ and larger loans are loans are not reported to HMDA but there is referred to as ‘‘jumbo mortgages.’’ 160 GSEs—that is, HMDA data on loans sold to nothing conclusive on this issue.162 Thus, it • Loans which are backed by the Federal the GSEs will not include many of their is not possible to exclude B&C loans from the government, including those insured by the purchases of prior-year loans.166 The comparisons reported below. However, HUD Federal Housing Administration and those implications of this for measuring GSE guaranteed by the Department of Veterans staff has identified HMDA reporters that performance can be seen in Tables A.3 and 163 Affairs, which are generally securitized by primarily originate subprime loans. The A.4a.167 the Government National Mortgage text below will report the effects of excluding Table A.3 summarizes affordable lending Association (‘‘Ginnie Mae’’), as well as Rural data for these lenders from the primary by the GSEs, depositories and the conforming Housing Loans, guaranteed by the Farmers market. The effects are minor mostly because market for the six-year period between 1993 Home Administration.161 Generally, the GSEs the analysis below focuses on home purchase and 1998 and for the borrower and census do not receive credit on the housing goals for loans, which accounted for only twenty tract characteristics covered by the housing purchasing loans with Federal government percent of the mortgages originated by the goals. The GSE percentages presented in backing. Loans without Federal government subprime lenders. During 1997 and 1998, the Table A.3 are derived from the GSEs’ own backing are referred to as ‘‘conventional subprime market was primarily a refinance data that they provide to HUD, while the mortgages.’’ market. depository and market percentages are taken
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The reason that HMDA data underestimate The next section compares the GSE A similar conclusion about Freddie Mac’s those purchases can be seen by performance with that of the overall market. performance can be drawn for the other goal- disaggregating Fannie Mae’s purchases The fact that the GSE data includes prior-year qualifying categories presented in Tables A.3 during 1997 into their ‘‘Prior Year’’ and as well as current-year loans, while the and A.4a: Freddie Mac’s performance was ‘‘Current Year’’ components. Table A.4a market data includes only current-year well below the market between 1993 and shows that the overall figure of 9.9 percent originations, means that the GSE-versus- 1998. For example, during the recent 1996– for very low-income borrowers is a weighted market comparisons are defined somewhat 98 period, mortgages financing properties in average of 13.4 percent for Fannie Mae’s inconsistently for any particular calendar underserved areas accounted for only 19.9 purchases during 1997 of ‘‘Prior Year’’ year. Each year, the GSEs have newly- percent of Freddie Mac’s purchases, mortgages and 8.7 percent for its purchases originated affordable loans available for compared with 22.9 percent of the loans of ‘‘Current Year’’ purchases. HMDA data purchase, but they can also purchase loans purchased by Fannie Mae and 24.9 percent report that 8.8 percent of Fannie Mae’s 1997 from a large stock of seasoned loans currently of the mortgages originated in the conforming purchases consisted of loans to very low- being held in the portfolios of depository market. Similarly, mortgages originated for income borrowers is based mainly on newly- lenders. Depository lenders have originated a low- and moderate-income borrowers mortgaged (current-year originations) loans large number of CRA-type loans over the past represented 34.9 percent of Freddie Mac’s that lenders report they sold to Fannie Mae. six years and many of them remain on their purchases during that period, compared with Therefore, the HMDA data figure is similar in books. In fact, HUD has encouraged the GSEs 42.6 percent of all mortgages originated in concept to the ‘‘Current Year’’ percentage to purchase seasoned, CRA-type loans that the conforming market. from the GSEs’’ own data. As Table A.4a have demonstrated their creditworthiness. One encouraging sign for Freddie Mac is shows, HMDA data and ‘‘Current Year’’ One method for making the data more that the borrower-income categories showed figures are practically the same in this case consistent is to aggregate the data over a rather large increase between 1997 and (about nine percent). Thus, the relatively several years, instead of focusing on annual 1998, followed by another significant large share of very low-income mortgages in data. This provides a clearer picture of the increase between 1998 and 1999. Special Fannie Mae’s 1997 purchases of ‘‘Prior Year’’ types of loans that have been originated and affordable (low-mod) loans increased from mortgages is the primary reason why Fannie are available for purchase by the GSEs. This 9.0 (34.1) percent in 1997 to 11.3 (36.9) Mae’s own data show an overall (both prior- approach is taken in Table A.3. percent in 1998 to 12.3 (40.0) percent in year and current-year) percentage of very c. Affordable Lending by the GSEs and the 1999. The reasons for this increase require low-income loans that is higher than that Primary Market further study, but certainly, an interesting reported in HMDA data. question going forward is whether Freddie Table A.3 summarizes goal-qualifying A review of the data in Table A.4a yields Mac can continue this 1997–99 pattern and lending by the GSEs, depositories and the the following insights about the reliability of thus further close its performance gap conforming market for the six-year period HMDA data at the national level for relative to the overall market. It is somewhat between 1993 and 1998 and for the more metropolitan areas. First, comparing the surprising that Freddie Mac’s purchases of recent 1996–98 period, which covers the HMDA data on GSE purchases with the GSE home loans in underserved areas did not period since the most recent housing goals ‘‘Current Year’’ data suggests that HMDA increase (in percentage terms) between 1997 have been in effect. As noted above, the data and 1998; as shown in Table A.4a, the data provided reasonable estimates of the are aggregated over time to provide a clearer GSEs’ current year purchases through underserved areas share of Freddie Mac’s 169 picture of how the GSEs’ purchases of both 1997. Second, the HMDA data percentages current-year and prior-year loans compare home loan purchases remained constant at through 1997 are actually rather close to with the types of mortgages that have been approximately 20 percent between 1994 and Freddie Mac’s overall percentages because originated during the past few years. All of 1998 before rising to 21.2 percent in 1999. Freddie Mac’s prior-year purchases often the data are for home purchase mortgages in Fannie Mae—1993–98 Performance resembled their current-year originations. metropolitan areas. Several points stand out Relative to the Market. The data in Table A.3 Fannie Mae, on the other hand, was more apt concerning the affordable lending show that Fannie Mae has also lagged to purchase seasoned loans with a relatively performance of Freddie Mac and Fannie Mae depositories and the primary market in the high percentage of low-income loans, which through 1998. funding of homes for lower-income means that HMDA data was more likely to Freddie Mac—1993–98 Performance borrowers and underserved neighborhoods. underestimate its overall performance. Relative to Market. The data in Table A.3 Between 1993 and 1998, 37.4 percent of However, this underestimation of the share of show that Freddie Mac substantially lagged Fannie Mae’s purchases were for low- and Fannie Mae’s goal-qualifying loans in the both Fannie Mae and the primary market in moderate-income borrowers, compared with HMDA data first arose in 1997, when Fannie funding affordable home loans between 1993 43.6 percent of loans originated and retained Mae’s purchases of prior-year loans were and 1998. During that period, 7.6 percent of by depositories and with 41.8 percent of particularly targeted to affordable lending Freddie Mac’s mortgage purchases were for loans originated in the primary market. Over groups. For the years 1993 to 1996, Fannie very low-income borrowers, compared with the more recent 1996–98 period, 22.9 percent Mae’s prior-year loan purchases more closely 9.2 percent of Fannie Mae’s purchases, 14.5 of Fannie Mae’s purchases financed resembled their current-year originations.170 percent of loans originated and retained by properties in underserved neighborhoods, Third, the 1998 data show that even the depositories, and 12.4 percent of loans compared with 25.8 percent of loans GSEs’ ‘‘Current Year’’ data differ from the originated in the conforming market (or 10.7 originated by depositories and 24.9 percent HMDA-reported data on GSE purchases. For percent if manufactured home loans are of loans originated in the conventional example, special affordable loans accounted excluded from the conforming market conforming market. for 12.1 percent of Fannie Mae’s current-year definition).172 As shown by the annual data However, Fannie Mae’s affordable lending purchases in 1998 compared with only 10.7 reported in Table A.4a, Freddie Mac did performance between 1993 and 1998 can be percent of Fannie Mae’s special affordable improve its funding of very low-income distinguished from Freddie Mac’s. First, purchases as reported by HMDA. Similarly, borrowers during this period, from 6.0 Fannie Mae performed much better than underserved areas accounted for 21.0 percent percent in 1993 to 7.6 percent in 1997, and Freddie Mac on every goal-category of Fannie Mae’s current-year purchases then to 9.9 percent in 1998. However, examined here. For example, home loans for compared with only 19.6 percent of Fannie Freddie Mac did not make as much progress special affordable loans accounted for 13.2 Mae’s underserved area purchases as as Fannie Mae (discussed below) in closing percent of Fannie Mae’s purchases in 1998, reported by HMDA. The same patterns exist the gap between its performance and that of compared with only 11.3 percent of Freddie for Freddie Mac’s 1998 data for the special the overall market. During the 1996–98 Mac’s purchases (see Table A.4a). In that affordable and underserved area categories. period in which the new goals have been in same year, 22.9 percent of Fannie Mae’s Thus, 1998 HMDA data do not provide a effect, the ratio of Freddie Mac’s average purchases were in underserved census tracts, reliable estimate at the national level of the performance (8.4 percent) to that of the compared with only 20.0 percent of Freddie goals-qualifying percentages for the GSEs’ overall market (13.0 percent) was only 0.65; Mac’s purchases. purchases of current-year (newly-mortgaged) this ‘‘Freddie-Mac-to-market’’ ratio remained Second, Fannie Mae improved its loans. More research on this issue is at only 0.76 even when manufactured homes performance between 1993 and 1998 and needed.171 are excluded from the market definition. made more progress than Freddie Mac in
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In fact, purchases of home loans increased by 3.1 considers the GSEs’ purchases of all single- by 1998, Fannie Mae’s performance was close percentage points from 36.9 percent to 40.0 family-owner mortgages, including both to that of the primary market for some percent between 1998 and 1999; this home purchase loans and refinance loans.174 important components of affordable lending. compares to a decrease of 1.1 percentage As shown in Table A.4c, shifting the analysis For example, in 1992, very low-income loans point for Fannie Mae, from 40.4 percent to to consider all (home purchase and accounted for 5.2 percent of Fannie Mae’s 39.3 percent. Data from 1999 HMDA will refinance) mortgages does not change the purchases and 8.7 percent of all loans enable HUD to examine the extent to which basic finding that both GSEs lag the primary originated in the conforming market, giving Freddie Mac has closed its performance gap market in serving low-income borrowers and a ‘‘Fannie Mae-to-market’’ ratio of 0.60. By relative to the overall conventional underserved neighborhoods. For example, in 1998, this ratio had risen to 0.86, as very low- conforming market. 1998 underserved areas accounted for 21.2 income loans had increased to 11.4 percent d. Prior-Year Loans (20.9) percent of Fannie Mae’s (Freddie of Fannie Mae’s purchases and to 13.3 Mac’s) purchases, compared to percent of market originations. An important source of the past differential approximately 25 percent for both depository A similar trend in market ratios can be in affordable lending between Fannie Mae institutions and the overall primary market. observed for Fannie Mae on the underserved and Freddie Mac concerns the purchase of Similarly, special affordable loans accounted areas category. Fannie Mae improved its prior-year loans. As shown in Table A.4a, the for 11.1 (10.9) percent of Fannie Mae’s performance relative to the market; for prior-year mortgages that Fannie Mae was (Freddie Mac’s) purchases of single-family- example, the ‘‘Fannie-Mae-to-market’’ ratio purchasing through 1998 were much more owner loans, compared to 14.9 percent for for underserved areas increased from 0.82 in likely to be loans for lower-income families depository institutions and 14.2 percent for 1992 to 0.93 in 1998. This improved and underserved areas than the newly- the overall primary market. performance relative to the overall market by originated mortgages that they were There are two changes when one shifts the Fannie Mae is in sharp contrast to Freddie purchasing. For example, 30.1 percent of analysis from only home purchase loans to Mac’s record during the same 1992 to 1998 Fannie Mae’s 1997 purchases of prior-year include all mortgages—one concerning the period—the ‘‘Freddie-Mac-to-market’’ ratio mortgages were loans financing properties in relative performance of Fannie Mae and for underserved areas actually declined, from underserved areas, compared with 20.8 Freddie Mac and one concerning the impact 0.84 in 1992 to 0.81 in 1998. As a result, percent of its purchases of newly-originated of subprime mortgages on the goals- Fannie Mae approached the home loan mortgages. These purchases of prior-year qualifying percentages. These are discussed market in underserved areas while Freddie mortgages were one reason Fannie Mae next. Mac lost ground relative to overall primary improved its performance relative to the Fannie Mae versus Freddie Mac primary market, which includes only newly- market. Performance—1997 to 1998. As indicated by originated mortgages, in 1997. Sixteen B&C Home Purchase Loan. As explained the above percentages for 1998, the borrower- percent of its prior-year mortgages qualified earlier, HMDA does not identify subprime income and underserved area comparisons for the Special Affordable Goal, compared loans, much less separate them into their A- between Fannie Mae and Freddie Mac with only 10.2 percent of its purchases of minus and B&C components. Randall change when the analysis switches from their newly-originated loans. The same patterns Scheessele at HUD has identified 200 HMDA acquisitions of only home purchase loans to are exhibited by the 1998 data. For example, reporters that primarily originate subprime their acquisitions of total (both home 17.9 percent of Fannie Mae’s prior-year loans and probably accounted for at least half purchase and refinance) loans—in the case of purchases during 1998 qualified for the of the subprime market during 1998.173 As total loans, Freddie Mac’s performance Special Affordable Goal, compared with only shown in Table A.4b, excluding the home 12.1 percent of its 1998 purchases of newly- resembles Fannie Mae’s performance in 1998 purchase loans originated by these lenders originated loans. Through 1998, Fannie Mae and surpasses Fannie Mae’s performance in from the primary market data has only minor seem to be purchasing affordable loans that 1999 (see Table A.4c). These important shifts effects on the goal-qualifying shares of the were originated by portfolio lenders in in the relative performance of Fannie Mae market. The average market percentages for previous years. and Freddie Mac are best described by 1998 are reduced as follows: low- and Freddie Mac, on the other hand, does not analyzing the 1997 to 1998 changes that led moderate-income (43.0 to 42.6 percent); seem to be pursuing such a strategy, or at to Freddie Mac catching up with Fannie Mae special affordable (15.5 to 15.2 percent); and least not to the same degree as Fannie Mae. in overall affordable lending, and then underserved areas (24.6 to 23.7 percent). As In 1997, 1998, and 1999, Freddie Mac’s examining the 1998 to 1999 changes that led explained earlier, the effects are minor purchases of prior-year mortgages and its to Freddie Mac surpassing Fannie Mae in mostly because this analysis focuses on home purchases of newly-originated mortgages had overall affordable lending. purchase loans, which accounted for only 20 similar percentages of special affordable and Consider the special affordable income percent of the mortgages originated by these low-and moderate-income borrowers. As category for 1997 and 1998. As shown earlier 200 subprime lenders—the subprime market Table A.4a shows, there is a small differential in Table A.4a, special affordable loans has been mainly a refinance market. between Freddie Mac’s prior-year and newly- accounted for a much higher percentage of GSEs’ Purchases of Home Loans in 1999. originated mortgages for the underserved Fannie Mae’s acquisitions of home purchase Although market data are not yet available areas category but it is much smaller than the loans than of Freddie Mac’s in each of these for 1999, the GSEs have reported their differential for Fannie Mae. Thus, during two years. Similarly, in 1997, special purchase data to HUD for that year. As 1997 and 1998, Freddie Mac’s purchases of affordable loans accounted for 11.5 percent of shown in Table A.4a, the 1993–98 pattern prior-year mortgages were less likely to Fannie Mae’s total (both home purchase and discussed above of Freddie Mac lagging qualify for the housing goals, and this was refinance) purchases, compared with 9.9 behind Fannie Mae in funding affordable one reason Freddie Mac’s overall affordable percent of Freddie Mac’s total purchases. loans changed in 1999, as Freddie Mac lending performance was below Fannie However, between 1997 and 1998, the special matched or slightly out-performed Fannie Mae’s during those years. In 1999, on the affordable percentage of Freddie Mac’s total Mae on all three goals-qualifying categories. other hand, there was surprisingly little purchases increased from 9.9 percent to 10.9 For example, special affordable loans difference between the goals-qualifying percent, while the corresponding percentage accounted for similar percentages of Freddie percentages for Fannie Mae’s prior-year and for Fannie Mae actually declined from 11.5 Mac’s (12.5 percent) and Fannie Mae’s (12.3 its current-year purchases. percent to 11.1 percent. Thus, in 1998, percent) purchases of home loans during Freddie Mac’s overall special affordable 1999. Low-mod (underserved areas) loans e. GSE Purchases of Total (Home Purchase percentage (10.9 percent) was approximately accounted for 40.0 (21.2) percent of Freddie and Refinance) Loans the same as Fannie Mae’s (11.1 percent). This Mac’s 1999 purchases, compared with 39.3 The above sections have examined the is reflected in Table A.4c by the ‘‘Fannie- (20.6) percent of Fannie Mae’s 1999 GSEs’ acquisitions of home purchase loans, Mae-to-Freddie-Mac’’ ratio of 1.02 for the purchases. Between 1998 and 1999, Fannie which is appropriate given the importance of special affordable category. Mae’s shares of goals-qualifying home loans the GSEs for expanding homeownership Further analysis shows that this declined in every case while Freddie Mac’s opportunities. To provide a complete picture improvement of Freddie Mac relative to
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Fannie Mae was due to Freddie Mac’s better special affordable performance increased by data, it is also instructive to compare the performance on refinance loans during 1998. 1.2 percentage points (from 11.1 percent to GSEs’ purchases of mortgages in individual The special affordable percentage of Fannie 12.3 percent) between 1998 and 1999 while metropolitan areas (e.g. MSAs). In this Mae’s refinance loans fell from 11.1 percent Freddie Mac’s performance increased 2.4 section, the GSEs’ purchases of single-family in 1997 to 9.7 percent in 1998, which is not percentage points (from 10.9 percent to 13.3 owner-occupied home purchase loans are surprising given that middle-and upper- percent). compared to the market in individual income borrowers typically dominate heavy B&C Loans. Table A.4b shows that the MSAs. 178 To do so, total primary market refinance markets such as 1998. But the estimates for the home purchase market do mortgage originations from three years, 1995, special affordable percentage of Freddie not change much when loans for subprime 1996 and 1997, are summed up by year, by Mac’s refinance loans did not drop very lenders were excluded from the HMDA MSA, and for GSE purchases of these loans. much, falling from 11.3 percent in 1997 to analysis; the reason was that these lenders The GSEs’ purchases of 1995 originations 10.7 percent in 1998.175 Thus, Freddie Mac’s operate primarily in the refinance market. include all 1995 originations purchased by higher special affordable percentage (10.7 Therefore, in this section’s analysis of the each GSE between 1995 and 1998 from 324 percent versus 9.7 percent for Fannie Mae) total market (including refinance loans), one MSAs. For their purchases of 1996 on refinance loans in 1998 enabled Freddie would expect the treatment of subprime originations, all 1996 originations purchased Mac to close the gap between its overall lenders to significantly affect the market between 1996 and 1999 from 326 MSAs are single-family performance and that of Fannie estimates. As indicated in Table A.4c, included. All 1997 originations purchased Mae. excluding 200 subprime lenders reduced the between 1997 and 1999 from 328 MSAs are The GSEs’ low-mod and underserved areas goal-qualifying shares of the total market in included for 1997 originations. This should percentages followed a somewhat similar 1998 as follows: special affordable (from 14.2 cover 90 to 95 percent of the 1995 through pattern as their special affordable percentages to 12.7 percent); low-mod (from 40.9 to 39.0 1997 originated loans that will be purchased between 1997 and 1998. In 1997, Freddie percent); and underserved areas (from 24.8 to by the GSEs, thus making the GSE data Mac’s underserved area percentage (21.6 22.6 percent). As discussed earlier, the GSEs comparable to HMDA market data. The loans percent) for total purchases was significantly have been entering the subprime market over are then grouped by the GSE housing goal less than Fannie Mae’s (23.6), but in 1998, the past two years, particularly the A-minus categories for which they qualify and the Freddie Mac’s underserved areas percentage portion of that market. Industry observers (20.9) was about the same as Fannie Mae’s ratio of the housing goal category originations estimate that A-minus loans account for 50– to total originations in each MSA is (21.2 percent), as indicated by a ‘‘Fannie Mae 70 percent of all subprime loans while the to Freddie Mac’’ ratio of 1.01. This calculated for each GSE and the market. The more risky B&C loans account for the GSE-to-market ratio is then calculated by convergence was mainly due to a sharper remaining 30–50 percent. Thus, one proxy decline in Fannie Mae’s underserved area dividing each GSE ratio by the corresponding for excluding B&C loans originated by the market ratio. For example, if it is calculated percentage for refinance loans between 1997 200 specialized lenders from the overall and 1998. that one of the GSEs’ purchases of Low- and market benchmark might be to reduce the Moderate-Income loans in a particular MSA Fannie Mae versus Freddie Mac goal-qualifying percentages from the HMDA Performance—1998 to 1999. In 1998, the is 47 percent of their overall purchases in data by half the above differentials; that MSA, while 49 percent of all ‘‘Fannie-Mae-to-Freddie-Mac’’ ratios for all accounting for B&C loans in this manner three goals-qualifying categories were originations in that MSA are Low-Mod, then would reduce the 1998 HMDA-reported goal- that GSE-to-market ratio is 47/49 (or 0.96). approximately one, indicating similar qualifying shares of the total conforming Table A.5 shows the performance of the performance for the two GSEs. As shown in market as follows: special affordable (from GSEs by MSA for 1995, 1996 and 1997 Table A.4c, the 1999 ratios were 0.93 for 14.2 to 13.5 percent); low-mod (from 40.9 to originations of home purchase loans. A GSE’s special affordable loans, 0.95 for low-mod 40.0 percent); and underserved areas (from performance is determined to be lagging the loans, and 0.93 for underserved areas loans— 24.8 to 23.7 percent). However, as discussed market if the ratio of the GSE housing goal indicating that Freddie Mac, for the first in Appendix D, much uncertainty exists loan purchases to their overall purchases is time, had significantly surpassed Fannie Mae about the size of the subprime market and its less than 99 percent of that same ratio for the in overall performance. For instance, in 1999, different components. More data and market. 179 For the above example, that GSE underserved areas accounted for 21.8 percent research are obviously needed on this is considered to be lagging the market. These of Fannie Mae’s purchases, compared with growing sector of the mortgage market. 176 23.5 percent of Freddie Mac’s purchases. For results are then summarized in Table A.5, each of the three housing goal categories, f. GSE Mortgage Purchases in Individual which reports the number of MSAs in which Fannie Mae’s performance increased between Metropolitan Areas each GSE under-performs the market with 1998 and 1999, but Freddie Mac’s increased While the above analyses, as well as earlier respect to the housing goal categories. even more. For example, Fannie Mae’s studies, 177 concentrate on national-level BILLING CODE 4210±27±P
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BILLING CODE 4210±27±C
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For 1996 originations, Fannie Mae: the results for loans originated in 1995 and mortgages taken out by higher-income • Lagged the market in 268 (83 percent) of 1997 are similar. borrowers and purchased by the GSEs. For the MSAs in the purchase of Underserved g. High Down Payments on GSEs’ Lower- example, considering the GSEs’ purchases of Area loans, Income Loans home purchase loans in 1995, 58 percent of • Lagged the market in 288 (88 percent) of very low-income borrowers made a down Recent studies have raised questions about the MSAs in the purchase of Low- and payment of at least 20 percent, compared whether the lower-income loans purchased with less than 50 percent of borrowers from Moderate-Income loans, and by the GSEs are adequately meeting the • other groups. In addition, a surprisingly large Lagged the market in 295 (90 percent) of needs of some lower-income families. In the MSAs in the purchase of Special particular, the lack of funds for down percentage of the GSEs’ first-time homebuyer Affordable loans. payments is one of the main impediments to loans had high down payments. In 1995, 35 Freddie Mac lagged the market to an even homeownership, particularly for many lower- percent of Fannie Mae’s and 41 percent of greater extent in 1996. Specifically, the income families who find it difficult to Freddie Mac’s first-time homebuyer loans market outperformed Freddie Mac in: accumulate enough cash for a down had down payments of 20 percent or more. • 296 (91 percent) of the MSAs in the payment. As this section explains, a Table A.6 presents similar data for the purchase of Underserved Area loans, noticeable pattern among lower-income loans GSEs’ purchases of total loans during 1999. • 322 (99 percent) of the MSAs in the purchased by the GSEs is the predominance Over three-fourths (75.1 percent) of the GSEs’ purchase of Low- and Moderate-Income of loans with high down payments. very low-income loans had a down payment loans, and HUD’s 1996 report to Congress on the more than 20 percent, compared with 72.1 • 323 (99 percent) of the MSAs in the possible privatization of Fannie Mae and percent of their remaining purchases. purchase of Special Affordable loans. Freddie Mac 180 found, rather surprisingly, Essentially, the GSEs have been purchasing Thus Freddie Mac was behind Fannie Mae that the mortgages taken out by lower-income lower-income loans with large down in at least three-quarters of the MSAs for all borrowers and purchased by the GSEs were payments. 181 three goal categories. As shown in Table A.5, as likely to have high down payments as the BILLING CODE 4210±27±P
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BILLING CODE 4210±27±C As discussed in Section C, both Fannie these loans should be more affordable. The These results are consistent with previous Mae and Freddie Mac have introduced high- down payment, as well as closing costs, can studies that show that the proportion of large LTV products: ‘‘Flexible 97’’ and ‘‘Alt 97’’ come from, gifts, grants or loans from a down payment loans purchased by the GSEs respectively. By lowering the required down family member, the government, a non-profit from lower-income borrowers is greater than payment to three percent and adding agency and loans secured by life insurance that for all loan purchases.182 flexibility to the source of the down payment, policies, retirement accounts or other assets.
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However, in order to control default risk, relative to the market but in other cases it has HUD staff, Fannie Mae presented the results these loans also have stricter credit history actually declined relative to the market. The of several comparisons of its purchases, requirements. findings with respect to Freddie Mac are based on the data supplied to the Department Fed Study. An important study by three similar to those discussed earlier in Section by Fannie Mae, with loans originated in the economists—Glenn Canner, Wayne Passmore E.2.c. conventional conforming market, based on 183 and Brian Surette —at the Federal Reserve b. Studies by Freddie Mac the HMDA data. In these analyses, Fannie Board showed the implications of the GSEs’ Mae stated that: focus on high down payment loans. Canner, In 1995 Freddie Mac published Financing • The percentage of Fannie Mae’s home Passmore, and Surette examined the degree Homes for A Diverse America, which purchase loans serving minorities exceeded to which different mortgage market contained a wide variety of statistics and the corresponding percentage in the institutions—the GSEs, FHA, depositories charts on the mortgage market. Several of the conventional conforming market by 2.6 and private mortgage insurers—are taking on exhibits contained comparisons between the percentage points in 1995, 2.0 percentage the credit risk associated with funding primary mortgage market and Freddie Mac’s points in 1996, and 2.7 percentage points purchases in 1993 and 1994: (18.6 percent vs. 15.9 percent) in 1997; affordable mortgages. The authors combined • market share and down payment data with While not asserting strict parity, this • The percentage of Fannie Mae’s home data on projected foreclosure losses to arrive report presented comparable frequency purchase loans for low-and moderate-income at an estimate of the credit risk assumed by distributions of primary market originations households exceeded the corresponding each institution for each borrower group. and Freddie Mac’s purchases by borrower percentage in the conventional conforming This study found that Fannie Mae and and census tract income, concluding that market by 0.2 percentage point in 1995, fell Freddie Mac together provided only 4 to 5 Freddie Mac ‘‘finances housing for 0.1 percentage point short of the market in percent of the credit support for lower- Americans of all incomes’’ and it ‘‘buys 1996, but exceeded it again, by 1.2 income and minority borrowers and their mortgages from neighborhoods of all percentage points (38.5 percent vs. 37.3 incomes.’’ percent), in 1997; neighborhoods. The relatively small role of • the GSEs providing credit support is due to With regard to minority share of census • The percentage of Fannie Mae’s home their low level of funding for these groups tracts, the report stated that Freddie Mac’s purchase loans for households in and to the fact that they purchase mainly ‘‘share of minority neighborhoods matches underserved areas fell 0.04 percentage point the primary market.’’ short of the conventional conforming market high down payment loans. FHA, on the other • hand, provided about two-thirds of the credit The report acknowledged that Freddie in 1996, but exceeded the corresponding support for lower-income and minority Mac’s purchases did not match the primary percentage in the conventional conforming borrowers, reflecting FHA’s large market market in terms of borrower race. It found market by 1.4 percentage points (25.5 percent shares for these groups and the fact that most that in 1994 African-Americans and vs. 24.1 percent) in 1997; FHA-insured loans have less-than-five- Hispanics each accounted for 4.9 percent of • The percentage of Fannie Mae’s home percent down payments. the primary market but only 2.7 percent and purchase loans for very low-income 4.0 percent respectively of Freddie Mac’s households and low-income households in 3. Other Studies of the GSEs Performance purchases. On the other hand, Whites and low-income areas fell 1.0 percentage point Relative to the Market Asian Americans accounted for 83.7 percent short of the conventional conforming market This section summarizes briefly the main and 3.2 percent of the primary market, but in 1995 and 0.9 percentage point short in findings from other studies of the GSEs’ 86.3 percent and 3.9 percent respectively of 1996, but exceeded the corresponding affordable housing performance. These Freddie Mac’s acquisitions. percentage in the conventional conforming include studies by the HUD and the GSEs as In its March 1998 Annual Housing market by 2.2 percentage points (12.7 percent well as studies by academics and research Activities Report (AHAR) submitted to the vs. 10.5 percent) in 1997. organizations. Department and Congress, Freddie Mac Some of these findings by Fannie Mae presented data on this issue for 1996 and a. Studies by Bunce and Scheessele differ from those of other researchers. This is 1997. This report stated that its purchases due in part to the fact that most other studies Harold Bunce and Randall Scheessele of ‘‘essentially mirror[ed] the overall have utilized HMDA data for both the the Department have published two studies distribution of mortgage originations in terms primary market and sales to the GSEs, but of affordable lending. In December 1996, they of borrower income.’’ However, the data Fannie Mae compared the primary market, published a study titled The GSEs’ Funding underlying Exhibit 4 of the AHAR indicated based on HMDA data, with the patterns in 184 of Affordable Loans. This report analyzed that the share of Freddie Mac’s 1997 the GSE loan-level data submitted to the HMDA data for 1992–95, including a detailed purchases for borrowers with income (in Department.188 189 comparison of the GSEs’ purchases with 1996 dollars) less than $40,000 was more originations in the primary market. In July than 4 percentage points below the d. Other Studies 1998, they updated their earlier study to corresponding share for the primary market Lind. John Lind examines HMDA data in analyze the mortgage market and the GSEs’ in 1996. A similar pattern prevailed in terms order to compare the GSEs’ loan purchase activities in 1996.185 The findings were of census tract income—the data underlying activity to mortgage originations in the largely similar in both studies: 186 Exhibit 5 of the AHAR indicated that the primary conventional conforming market.190 • Both GSEs lagged the primary share of Freddie Mac’s 1997 purchases in Like other studies, Lind presents an aggregate conventional market, depositories, and tracts with income in excess of 120 percent comparison of GSE/primary market (particularly) FHA in funding mortgages for of area median income exceeded the correspondence for Black, Hispanic, low- lower-income and historically underserved corresponding share for the primary market income borrowers, and low- and moderate- borrowers. FHA stands out as the major in 1996 by about 4 percentage points. income Census tracts. Unlike other studies, funder of affordable loans. In 1996, In its March 1998 AHAR, Freddie Mac however, Lind also examines market approximately 30 percent of FHA-insured found a much closer match between the correspondence at the individual loans were for African-American and distributions of home purchase mortgages by metropolitan area and regional levels. Hispanic borrowers, compared with only 10 down payment for Freddie Mac’s 1997 Lind finds that the GSEs are not leading percent of the loans purchased by the GSEs acquisitions and the primary market in 1997, the market, but that Fannie Mae, in or originated in the conventional market. as the latter was reported by the Federal particular, improved its performance • The two GSEs show very different Housing Finance Board. Specifically, Exhibit between 1993 and 1994. In 1994, Lind finds patterns of lending—Fannie Mae is much 6 of the AHAR reported that 42 percent of that the shares of Fannie Mae’s home more likely than Freddie Mac to serve borrowers in each category made down purchase loans to minority and low-income underserved borrowers and their payments of less than 20 percent.187 borrowers were comparable to the industry’s neighborhoods. Since 1992, Fannie Mae has shares. But the share of its home purchase narrowed the gap between its affordable c. Studies by Fannie Mae loans for low- and moderate-income census lending performance and that of the other Fannie Mae has not published any studies tracts and the shares of Freddie Mac’s home lenders in the conforming market. Freddie on the comparability of its mortgage purchase loans for all categories examined Mac’s improvement has been more mixed— purchases with the primary market. trailed those for the industry as a whole. For in some cases it has improved slightly However, in an October 1998 briefing for refinance mortgages, on the other hand, both
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GSEs trailed the industry in terms of the in GSE market share among a sample of 426 increasing the flow of mortgage credit to the shares of their loans for the groups analyzed. nonmetropolitan counties in eight census lesser one-half of all tracts, which includes In a subsequent study, Lind found that the divisions.194 Conventional conforming many areas with stable housing stocks and difference between the affordable lending mortgage originations were estimated using viable job markets. performance of Fannie Mae and Freddie Mac residential sales data, adjusted to exclude The alternative approach of directing credit was caused by differences in policy and government-insured and nonconforming to underserved areas was found to be helpful operating procedures of the GSEs, and not loans. Multivariate analysis was used to only insofar as it has helped direct credit to differences in the make-up of their suppliers investigate whether GSE market shares neighborhoods with slightly lower household of loans.191 differed significantly by location, after income levels and higher incidence of Ambrose and Pennington-Cross. There controlling for the economic, demographic, minorities than found elsewhere in the exists a wide variation in the market shares housing stock and credit market differences metropolitan area. McClure concluded that of the GSEs, FHA and portfolio lenders among counties that could affect use of the neighborhoods that receive very low levels of across geographic mortgage markets. Brent secondary markets. The study also mortgage credit seemed to provide Ambrose and Anthony Pennington-Cross investigated whether there were significant insufficient housing or employment analyze FHA, GSE and portfolio lender differences between the nonmetropolitan opportunities to justify the effort that would market shares to find insights into what borrowers served by Fannie Mae and those be required to direct additional mortgage factors affect the market shares for FHA served by Freddie Mac. credit to them. eligible (under the FHA loan limit) loans.192 MacDonald found that space contributes McClure concluded that whatever the They hypothesize that the GSEs try to significantly to explaining variations in GSE approach, the GSEs have not been performing mitigate higher perceived risks at the MSA market shares among nonmetropolitan as well as the primary credit lenders in the level by tightening lending standards, counties, but its effects are quite specific. Kansas City metropolitan area. In terms of generating a prediction of higher FHA market One region—non-adjacent West North helping underserved areas, the GSEs lagged share in locations with characteristically Central counties—had significantly lower behind the industry in the proportion of higher or dynamically worsening risk. A GSE market shares than all others. The loans found in these areas. In terms of second hypothesis is that market share of disparity persisted when analysis was helping low-income and minority borrowers, portfolio lenders increases in areas with restricted to underserved counties only. The the GSEs also lagged behind the industry. higher risk due to ‘‘reputation effects’’ and study also suggested significant disparities However, to the extent that the GSEs served GSE repurchase requirements. In their model, between the income levels of the borrowers these targeted populations, these households they account for cyclical risk, permanent served by each agency, with Freddie Mac used this credit to move to neighborhoods risk, demographic, lender and regional buying loans from borrowers with higher with better housing and employment differences. incomes than the incomes of borrowers opportunities than were generally present in Ambrose and Pennington-Cross found that served by Fannie Mae. An important the underserved areas. the GSEs exhibit risk averse behavior as limitation on any study of nonmetropolitan Williams.196 This study looks at mortgage evidenced by lower GSE market presence in mortgages was found to be the lack of Home lending in underserved markets in the MSAs experiencing increasing risk and in Mortgage Disclosure Act data. This meant primary and secondary mortgage markets for MSAs that historically exhibit high-risk that more precise conclusions about the the MSAs in Indiana. A more extensive tendencies. FHA market shares, in contrast, extent to which the GSEs mirror primary analysis is provided for South Bend/St. are associated with high or deteriorating risk mortgage originations in nometropolitan Joseph County, Indiana that looks at the GSE conditions. Portfolio lenders increase their areas could not be reached. purchases in underserved markets by type of mortgage portfolios during periods of McClure. Kirk McClure examined the twin primary market lender in both 1992 and economic distress, but increase the sale of mandates of FHEFSSA: to direct mortgage 1996. It shows the percentage of loans bought originations out of portfolio during periods of credit to neighborhoods that have been by the GSEs and the loan they did not buy. increasing house prices. Lenders in MSAs underserved by mortgage lenders; and to This study found that the GSEs were more with historically high delinquency hold more direct mortgage credit to low-income and aggressive in closing the gap in St. Joseph loans in portfolio. MSA risk is therefore minority households.195 Using the Kansas County than in other MSAs in Indiana. It also concentrated among portfolio lenders and in City metropolitan area as a case study, found that Fannie Mae’s underserved market FHA, with the GSEs bearing relatively little mortgages purchased by the GSEs in 1993– performance was slightly better than Freddie credit risk of this kind. The study does find 96 were compared with mortgages held by Mac’s performance. that, other things being equal, the GSEs do portfolio lenders in order to determine the Williams compared the GSEs performance have a higher presence in underserved areas performance of the GSEs in serving these two in underserved markets and CRA institutions and in areas where the minority population objectives. Kansas City provides a useful case between 1992 and 1995. It shows that the is highly segregated. study area for this analysis, because it GSEs have narrowed the gap between MacDonald (1998). Heather MacDonald 193 includes a range of weak and strong housing themselves and lenders while CRA examined the impact of the central city market areas where homebuyers have been institutions have lost ground relative to non- housing goal from HUD’s 1993–1995 interim able to move easily to serve their housing, CRA lenders. A pattern observed across all housing goals. Census tracts were clustered employment, and neighborhood needs. Indiana MSAs is that the GSEs do not appear according to five variables (median house McClure found that borrowers are better to lead the market but rather almost perfectly value, median house age, proportion of served if credit is directed to them mirrored the performance of mortgage renters, percent minority and proportion of 2 independent of location. Very low-income companies. to 4 units) argued to impede secondary and minority borrowers fared better, in terms Williams looked at the impact of size and market purchases of homes in some of the demographic, housing, and location of lenders on the home mortgage neighborhoods. Borrower characteristics and employment opportunities of the market. Large lenders were more likely to lending patterns were compared across the neighborhoods into which they located, than finance mortgages for very low-income and clusters of tracts, and across central city and borrowers in underserved neighborhoods, African American borrowers than smaller suburban tracts. Clustered tracts were found suggesting that directing credit to low- lenders. Lenders headquartered in Indiana to be more strongly related to a set of key income and minority households has had the were more likely to purchase mortgages in lending variables than are tracts divided desired effect of helping these households underserved areas than lenders who only had according to central city/suburban purchase homes in areas where they would branches or no apparent physical presence in boundaries. MacDonald concludes that find good homes and good employment Indiana. This suggest that served markets targeting affirmative lending requirements on prospects. According to McClure, HUD’s might benefit more than underserved areas the basis of neighborhood characteristics 1996–99 housing goals defined underserved from increased competition from non-local rather than political or statistical divisions tracts very broadly, such that nearly one-half lenders. may provide a more appropriate framework of the tracts in the Kansas City area are Gyourko and Hu. This study focuses on the for efforts to expand access to credit. categorized as underserved. Because the GSEs’ housing goals looking at the intra- MacDonald (1999). In a 1999 study, definition of underserved is so broad, metropolitan distribution of mortgage Heather MacDonald investigated variations directing credit to these tracts means only acquisitions by Fannie Mae and Freddie Mac
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The study found that the conducted to look at the influence of specific GSE effect, then the purchase policies of the distribution of goal-qualifying loan purchases borrower and neighborhood characteristics GSEs ‘‘explains part of the lending gap’’. If by the GSEs does not match the distribution on the probability that a loan is purchased by the equal-treatment value without accounting of goal-qualifying households. On average 44 one the GSEs. The results support the for racial difference in GSE effects is equal percent of Low- and Moderate-Income Goal findings of the descriptive analysis with to or lower than the corresponding value and 46 percent of Special Affordable Goal some exceptions. In contrast to the than accounts for racial difference in GSE qualifying households are located in central descriptive analysis, the impact of effect, then GSEs effect does not explain cities. This compares to the GSEs’ mortgage geographically targeted census tracts and racial lending gaps. purchases where 26 percent of Low- and neighborhood minority composition on the Myers concludes that there are no Moderate-Income Goal and 36 percent of GSEs’ purchasing behavior was inconsistent consistent patterns for the GSE effect, either Special Affordable Goal were located in over the 44 areas. 199, 200 across racial groups or across MSAs—that is, central cities. The logistic regression analysis was the GSE discussions do not systematically This study develops criteria for evaluating extended to test for changes in the GSEs’ explain the observed racial disparities in loan the GSEs’ mortgage purchasing performance purchasing behavior over time (1993–1996). rejection rates. In many MSAs, the GSE effect in census tracts. The first measure is a ratio. Changes in the GSEs’ purchasing activity are can account for some of the high rejection The numerator of the ratio is the share of the observed, but no systematic time trend was rates of blacks and ‘‘others’’. Among other GSEs’ mortgage purchases that qualify for the found. One explanation that was given for racial groups, however, there are as many Special Affordable Housing Goal in the this result was that changes in the GSEs’ MSAs where there is no such finding as there census tract. The denominator is the share of purchases over time might be related to are ones where the effect seems to hold. But households that are targeted by the Special changes in overall market activity rather than even in those cases where the effect seems to Affordable Housing Goal in the census tract. changes in purchasing behavior by either of hold the amount explained is small. Myers A ratio is also computed for the Low- and the GSEs. finds that the impact is so small that even Moderate-Income Housing Goal. If the ratio is Myers. Earlier studies have shown that large differences in actual probabilities that less than 0.80 then the census tract is called racial minority groups—particularly African loans are not sold to GSEs cannot explain the under-represented, meaning that the share of Americans and Latinos—are less likely to be substantial racial difference in loan-rejection the GSEs’ mortgage purchases which qualify approved for home mortgage loans than rates. for the housing goal is less than 80 percent members of majority populations. It has been Bradford. In a case study comparison of the of the share of the households that the goal suggested that primary lenders may use the Chicago and Washington D.C. mortgage targets. The analysis of these ratios shows difficulty of selling loans to the GSEs on the markets, Bradford found that minority areas that: (1) Central cities are more likely to be secondary market as a pretext for not received considerably lower levels of GSE under-represented in terms of the share of approving loans to racial minority group purchases than white areas in the Chicago affordable loans purchased by the GSEs, (2) members. This study uses the residual market, but about equal and sometimes in suburbs, the larger the census tracts’ difference approach to measure racial higher levels of GSE purchases in the D.C. percent minority the greater the probability discrimination in mortgage lending and study area.204 Bradford’s interprets this that affordable loan purchases are under- estimates differential treatment by the GSEs finding as partially the result of the represented, and (3) the higher the tract’s of minority and nonminority first-time exceptionally large minority population in median income, the greater the likelihood homeowner loans in the 23 largest the D.C. area living in new development and that census tract is over-represented. metropolitan statistical areas (MSAs).201 suburban areas when compared to the Gyourko and Hu’s results are broadly The residual difference approach minority population distribution in the consistent across the 22 MSAs analyzed; decomposes racial gaps in HMDA-reported Chicago market. In his view, the fact that however, some noteworthy exceptions are loan-rejection rates between the component many minority homeowners in the D.C. area made. In a few MSAs, particularly Miami and that can be explained and that which cannot reside in suburban and new growth areas New York, the mismatch of affordable GSE be explained by racial differences in provides for increasing housing values and purchases to affordable households is much characteristics. Characteristics Myers uses to high levels of demand that help mitigate the less severe. In Boston, Los Angeles and New explain poor credit history and denial rates effects of mortgage default by providing York, census tracts with higher relative include borrower, neighborhood, and loan borrowers with more options to refinance or median incomes are more likely to be under- variables from HMDA, the GSE Public Use sell their homes to escape from foreclosure. represented. Data Base, and Census 1990.202 Myers This makes the minority market in the D.C. Case and Gillen. This study provides a interprets the unexplained gap as being area generally more attractive to lenders and descriptive analysis of market share and ‘‘discrimination’’. The residual difference secondary market investors. logistic regression analysis of the GSEs’ method permits the estimation of minority Bradford argues that the role of individual mortgage purchase patterns in 44 loan rejection rates when minorities are lenders is an important factor in explaining metropolitan areas over the period from 1993 treated like equally qualified white borrowers the disparate racial patterns between the to 1996.198 The study compares the GSEs and (i.e. equal treatment values). Chicago and D.C. study areas. The large GSE the market along several borrower and There are three main findings of this study. lenders and the large lenders serving neighborhood characteristics. First, there are unexplained disparities in minority markets tend to be the same lenders This descriptive analysis of market shares loan-rejection rates between black and white in the D.C. market. He contends that the finds that, compared with mortgages applicants for home mortgage loans in parity in the racial markets in the D.C. area originated in the market, the GSEs’ are less HMDA data; that is, blacks have higher would disappear and would be replaced by likely to purchase loans made to lower- denial rates than whites even after levels of disparity comparable to those in the income borrowers, minority borrowers, controlling for variables such as income. Chicago market if just a handful of large GSE borrowers in lower-income neighborhoods, Second, the probability that a loan won’t sell lenders in the minority areas reduced their and borrowers in central city neighborhoods. on the secondary market systematically GSE levels to the norm for the entire market. The GSEs are more likely to purchase loans increases the probability that a loan will be Bradford also examines differences made to higher income borrowers, white rejected by the lender.203 Third, African between Fannie Mae and Freddie Mac in the borrowers, borrowers in higher income American and Hispanic loans are often less two study areas. Both Fannie Mae and neighborhoods, and suburban borrowers than likely to sell on the secondary market than Freddie Mac showed lower levels of the non-GSEs. Case and Gillen find that white loans. purchases in minority areas than in white Fannie Mae provides a higher proportion of The study also looks at whether the GSEs’ areas in the Chicago market, based on his total GSE funding for mortgage lending to purchasing behavior explains racial gaps in research. While there were some instances lower-income and minority borrowers and to loan rejection rates. It compares the residual where Freddie Mac made improvements
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Table A.7b in Section G shows that In the Chicago market, for example, Fannie While the GSEs improved their ability to in 1998 the GSEs financed 68 percent of Mae had higher levels of market shares in the serve low- and moderate-income borrowers, owner-occupied dwelling units but only 19 racially changing areas than in the white it does not appear that they have gone as far percent of single-family rental units. areas while Freddie Mac always had lower as some primary lenders to serve these There are a number of factors that have market shares in the racially changing areas borrowers and to minimize the limited the development of the secondary compared to the white areas. In the D.C. disproportionate effects on minority market for single-family rental property market, Bradford found that while the GSEs borrowers. From previous published analyses mortgages thus explaining the lack of as a whole showed relative parity in the of the GSEs’ mortgage purchases, differences penetration by the GSEs. Little is collectively different racial markets, this was largely due between the income characteristics and racial known about these properties as a result of to Fannie Mae’s performance that countered composition of borrowers served by the the wide spatial dispersion of properties and the systematic disparities in the Freddie Mac primary mortgage market and the purchase owners, as well as a wide diversity of purchases. activity of the GSEs were found. ‘‘This means characteristics across properties and Harrison, et. al. Theories of ‘‘information that the GSEs are not serving lower-income individuality of owners. This makes it externalities,’’ supported by recent empirical and minority borrowers to the extent these difficult for lenders to properly evaluate the evidence, suggest that property transactions families receive mortgages from primary probability of default and severity of loss for 210 in a particular market area generate lenders.’’ From UI’s discussions with these properties. information making similar future lenders, it was revealed that primary lenders Single-family rental properties are transactions in that same market area less are originating mortgages to lower-income important for the GSEs housing goals, risky for prospective lenders. Specifically, borrowers using underwriting guidelines that especially for meeting the needs of lower- home sales generate information useful to allow lower down payments, higher debt-to- income families. In 1999 around 73 percent independent appraisers in generating more income ratios and poorer credit histories than of single-family rental units qualified for the Low- and Moderate-Income Goals, compared precise value estimates. This increased allowed by the GSEs’ guidelines. These mortgages are originated to a greater extent to with 38 percent of one-family owner- precision, in turn, reduces the uncertainty minority borrowers who have lower incomes occupied properties. This heavy focus on (risk) faced by lenders, and hence, may and wealth. From this evidence, UI lower-income families meant that single- increase acceptance rates and the flow of concludes that the GSEs appear to be lagging family rental properties accounted for 15 funds to the given market area. the market in servicing low- and moderate- percent of the units qualifying for the Low- Using a sample of GSE purchasing income and minority borrowers. and Moderate-Income Goal, even though they activities across twelve Florida counties, Furthermore, UI found ‘‘that the GSEs’ accounted for 8 percent of the total units Harrison et al. find some evidence that both efforts to increase underwriting flexibility (single-family and multifamily) financed by Fannie Mae and Freddie Mac are more active and outreach has been noticed and is the GSEs. Single-family rental properties in neighborhoods with historically low applauded by lenders and community account for 16 percent of the geographically- transaction volume than they are in other targeted and 23 percent of the special 205 advocates. Despite the GSEs’ efforts in recent neighborhoods. In addition, the results of years to review and revise their underwriting affordable housing goals. their investigation are generally consistent criteria, however, they could do more to A comparison of the GSEs’ single-family with the previous literature suggesting serve low- and moderate-income borrowers rental and one-family owner-occupied Fannie Mae outperformed Freddie Mac in and to minimize disproportionate effects on mortgage purchases reveals the following historically underserved market segments in minorities. Moreover, the use of automated broad patterns of borrower and neighborhood 1993–95. underwriting systems and credit scores may characteristics. Borrowers for single-family 4. GSEs’ Underwriting Guidelines place lower-income borrowers at a rental properties are more likely to be disadvantage when applying for a loan, even minorities than borrowers for one-family Most studies on affordability of mortgage though they are acceptable credit risks.’’ 211 owner-occupied properties. Mortgages loans are quantitative using HMDA data, purchased by the GSEs for single-family HUD’s GSE Public Use Database or some 5. The GSEs’ Support of the Mortgage Market rental properties compared with one-family other related database. To complement these for Single-family Rental Properties owner-occupied properties are more likely to studies, HUD commissioned a study by the Single-family rental housing is an be located in lower-income and higher Urban Institute (UI) to examine recent trends important part of the housing stock because minority neighborhoods. More single-family in the GSEs’ underwriting criteria and to seek it is an important source of housing for rental than one-family owner-occupied attitudes and opinions of informed players in lower-income households. Based on the 1996 mortgages were refinance or prior-year loans. four local mortgage market markets (Boston, Property Owners and Managers Survey, 49 A closer look at borrower characteristics Detroit, Miami and Seattle).206 Interviews percent of all rental units are in properties for single-family rental properties shows the were conducted with mortgage lenders, with fewer than five units and the 1997 following. First, based on ethnic/racial community advocates and local government American Housing Survey found that characteristics, borrowers for investor-owned officials—all local actors who would be approximately 59 percent of the stock of properties are similar to borrowers for one- knowledgeable about the impact of the GSEs’ single-family rental units are affordable to family owner-occupied properties. Second, underwriting policies on their ability to fund very-low income families (i.e., families borrowers for single-family rental properties, affordable loans for lower-income earning 60 percent or less of the area median especially owner-occupied 2- to 4-unit borrowers.207 income). Of the GSEs’ mortgage purchases in properties, are more likely to be nonwhite The UI report reveals three major trends in 1999, around 30 percent of the single-family than are borrowers for one-family owner- the GSEs’ underwriting that affects affordable rental units financed were affordable to very- occupied and investor-owned properties. lending. These include increased flexibility low income households. About 35 percent of the borrowers for owner- in standard 208 underwriting and appraisal While single-family rental properties are a occupied 2- to 4-unit properties are non- guidelines, the introduction of affordable large segment of the rental stock for low- white compared with around 17 percent for lending products, and the introduction of income families, they make up a small both one-family and investor-owned automated underwriting and credit scores in portion of the GSEs’ overall business. In properties. For one-family owner-occupied the loan application process. Through these 1999, Fannie Mae and Freddie Mac and investor-owned properties about 5 trends, Fannie Mae and Freddie Mac have purchased more than $26 billion in percent of borrowers are African American, attempted to increase their capacity to serve mortgages for these properties. These compared with 9 percent for owner-occupied low- and moderate-income homebuyers. purchases represented less than 5 percent of 2- to 4-unit properties. A similar comparison They are also eliminating practices that could the total dollar amount of their overall 1999 applies for Hispanic borrowers, 6 percent and potentially have had disparate impacts on business. 15 percent respectively. minority homebuyers. While both GSEs have It follows that since single-family rentals With regard to neighborhood made progress, ‘‘most [of those interviewed] make up such a small part of the GSEs characteristics, a comparison of different
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For units in Industry type (single-family owner, single-family investor 1-unit properties, about 18 percent rental, and multifamily), shows the relative were in low-income neighborhoods, FHEFSSA requires the Secretary, in importance of the GSEs in each of the goal- compared with 31 percent from units in 2- determining the Low- and Moderate-Income to 4-unit rental properties. About 40 percent Housing Goal, to consider the GSEs’ ability qualifying markets. of the units in investor properties were in to ‘‘lead the industry in making mortgage 1. GSEs’ Role in Major Sectors of the high-minority neighborhoods, compared to credit available for low- and moderate- Mortgage Market only a slightly lower 37 percent for owner- income families.’’ Congress indicated that occupied 2- to 4-unit properties. this goal should ‘‘steer the enterprises toward Table A.7 compares GSE mortgage The GSEs can mitigate risk by purchasing the development of an increased capacity purchases with HUD’s estimates of the mortgages which are seasoned or refinanced. and commitment to serve this segment of the numbers of units financed in the The data show that mortgages on properties housing market’’ and that it ‘‘fully expect[ed] conventional conforming market during with additional risk components such as [that] the enterprises will need to stretch 1997(A.7a) and 1998 (A.76).213 Because 1997 being investor-owned, in low- income their efforts to achieve [these goals].’’ 212 was a more typical year then the heavy neighborhoods, and/or in high-minority The Department and independent refinance year of 1998, the following neighborhoods are more likely to be seasoned researchers have published numerous studies discussion will focus on 1997. HUD or refinanced. For the GSEs’ mortgage examining whether or not the GSEs have estimates that there were 7,306,950 owner been leading the single-family market in purchases, in general, mortgages on investor- and rental units financed by new mortgages terms of their affordable lending owned properties are more likely to be prior- in 1997. Fannie Mae’s and Freddie Mac’s year than mortgages on owner-occupied 2- to performance. This research, which is mortgage purchases financed 2,948,112 4-unit properties (based on unit counts). summarized in Section E, concludes that the dwelling units, or 40 percent of all dwelling These patterns are consistent with the notion GSEs have generally lagged behind other that investor properties are more risky than lenders in funding lower-income borrowers units financed. As shown in Table A.7a, the owner-occupied 2- to 4-unit properties. and their communities. As required by GSEs play a much smaller role in the goals- FHEFSSA, the Department has produced qualifying markets than they do in the overall F. Factor 4: Size of the Conventional estimates of the portion of the total (single- market. During 1997, new mortgages were Conforming Mortgage Market Serving Low- family and multifamily) mortgage market that originated for 4,201,287 dwelling units that and Moderate-Income Families Relative to qualifies for each of the three housing goals qualified for the Low- and Moderate-Income the Overall Conventional Conforming (see Appendix D). Congress intended that the Market Goal; the GSEs low-mod purchases financed Department use these market estimates as 1,330,516 dwelling units, or only 32 percent The Department estimates that dwelling one factor in setting the percentage target for of the low-mod market. Similarly, the GSEs’ units serving low- and moderate-income each of the housing goals. The Department’s purchases accounted for only 25 percent of families will account for 50–55 percent of estimate for the size of the Low- and the special affordable market and 34 percent total units financed in the overall Moderate-Income market is 50–55 percent, 214 conventional conforming mortgage market which is substantially higher than the GSEs’ of the underserved areas market. during 2001–2003, the period for which the performance on that goal. Obviously, the GSEs are not leading the Low- and Moderate-Income Housing Goal is This section provides another perspective industry in financing units that qualify for established. The market estimates exclude on the GSEs’ performance by examining the the three housing goals. B&C loans and allow for much more adverse share of the total mortgage market and the BILLING CODE 4210±27±P
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BILLING CODE 4210±27±C credit for low- and moderate-income owners percent of the low-mod loans that were While the GSEs are free to meet the of single-family properties. However, the originated, 35 percent of the special Department’s goals in any manner that they GSEs have been lagging behind the market in affordable loans, and 48 percent of the deem appropriate, it is useful to consider their funding of single-family owner loans underserved area loans. Thus, the GSEs need their performance relative to the industry by that qualify for the housing goals, as to improve their performance and it appears property type. As shown in Table A.7a, the discussed in Section E.2.c. Between 1996 and that there is ample room in the non-GSE GSEs accounted for 50 percent of the single- 1998, low- and moderate-income borrowers portions of the goals-qualifying markets for family owner market in 1997 but only 24 accounted for 34.9 percent of Freddie Mac’s them to do so. For instance, the GSEs are not percent of the multifamily market and 14 mortgage purchases and 38.4 percent of involved in almost two-thirds of special percent of the single-family rental market (or Fannie Mae’s mortgage purchases, but 42.6 affordable owner market. a combined share of 20 percent of the rental percent of primary market originations in Single-family Rental Market. Single-family market). metropolitan areas. The market share data rental housing is a major source of low- and Single-family Owner Market. This market reported in Table A.7. for the single-family moderate-income housing. As discussed in is the bread-and-butter of the GSEs’ business, owner market tell the same story. The GSEs’ Appendix D, data on the size of the primary and based on the financial and other factors purchases of single-family owner loans market for mortgages on these properties is discussed below, they clearly have the ability represented 50 percent of all newly- limited, but information from the American to lead the primary market in providing originated owner loans in 1997, but only 43 Housing Survey on the stock of such units
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It mortgages, including lenders who do not sell totaled only 14 percent of newly-mortgaged discusses the GSEs’ role in the mortgage many of their mortgages to Fannie Mae or single-family rental units that were affordable Freddie Mac.221 The guidelines are also to low- and moderate-income families. market; their ability, through their underwriting standards, new programs, and commonly followed in underwriting Many of these properties are ‘‘mom-and- ‘‘jumbo’’ mortgages, which exceed the pop’’ operations, which may not follow innovative products, to influence the types of loans made by private lenders; their maximum principal amount which can be financing procedures consistent with the purchased by the GSEs (the conforming loan development and utilization of state-of-the- GSEs’ guidelines. Much of the financing limit)—such mortgages eventually might be needed in this area is for rehabilitation loans art technology; the competence, expertise sold to the GSEs, as the principal balance is on 2–4 unit properties in older areas, a and training of their staffs; and their financial amortized or when the conforming loan limit market in which the GSEs’ have not played resources. is otherwise increased. The GSEs, through a major role. However, this sector could a. Role in the Mortgage Market their automated underwriting systems, have certainly benefit from an enhanced role by started adapting their underwriting for As discussed in Section C of this the GSEs, and the Department believes that subprime loans and other loans that have not Appendix, the GSEs’ single-family mortgage there is room for such an enhanced role. met their traditional underwriting standards. Multifamily Market. Fannie Mae is the acquisitions have generally followed the Because the GSEs’ guidelines set the credit largest single source of multifamily finance volume of originations in the primary market standards against which the mortgage in the United States, and Freddie Mac has for conventional mortgages. However, in applications of lower-income families are made a solid reentry into this market over the 1997, single-family originations rose by judged, the enterprises have a profound last five years. However, there are a number nearly 10 percent, while the GSEs’ influence on the rate at which mortgage of measures by which the GSEs lag the acquisitions declined by 7 percent. As a funds flow to low- and moderate-income multifamily market. For example, the share result, the Office of Federal Housing borrowers and underserved neighborhoods. of GSE resources committed to the Enterprise Oversight (OFHEO) estimates that Congress realized the crucial role played by multifamily purchases falls short of the the GSEs’ share of single-family mortgage the GSEs’ underwriting guidelines when it multifamily proportion prevailing in the originations declined from 37 percent in required each enterprise to submit a study on overall mortgage market. HUD estimates that 1996 to 32 percent in 1997. The GSEs’ single- its guidelines to the Secretary and to newly-mortgaged units in multifamily family mortgage share jumped to an Congress in 1993, and when it called for the properties represented 17 percent all (single- estimated 43 percent in 1998 and 42 percent Secretary to ‘‘periodically review and family and multifamily) dwelling units in 1999, but that is still well below the peak comment on the underwriting and appraisal financed during 1997.215 By comparison, of 51 percent attained in 1993. guidelines of each enterprise.’’ Some of the multifamily acquisitions represented 13.5 The GSEs’ high shares of originations conclusions from a study of the GSEs’ single- percent all units backing Fannie Mae’s family underwriting guidelines prepared for purchases of mortgages originated in 1997, during the 1990s led to a rise in their share of total conventional single-family mortgages the Department by the Urban Institute have with a corresponding figure of only 8.8 been discussed in Section E. percent for Freddie Mac.216 In other words, outstanding, including both conforming the GSEs place more emphasis on single- mortgages and jumbo mortgages.218 OFHEO c. State-of-the-Art Technology family mortgages than they do on estimates that the GSEs’ share of such Both GSEs are in the forefront of new multifamily mortgages. mortgages outstanding jumped from 34 developments in mortgage industry The GSEs role in the multifamily market is percent at the end of 1991 to 40 percent at technology. Each enterprise released an significantly smaller than in single-family. As the end of 1994 and an estimated 45 percent automated underwriting system in 1995— shown in Table A.7a, the GSEs’ purchases at the end of 1998.219 All of the increase in Freddie Mac’s ‘‘Loan Prospector’’ and Fannie have accounted for only 24 percent of newly the GSEs’ relative role between 1991 and Mae’s ‘‘Desktop Underwriter.’’ Both systems financed multifamily units during 1997—a 1998 was due to the growth in their portfolio rely on numerical credit scores, such as those market share much lower than their 50 holdings as a share of mortgages outstanding, developed by Fair, Isaac, and Company, and percent share of the single-family owner from 5 percent at the end of 1991 to 17 additional data submitted by the borrower, to market. Thus, these data suggest that a percent at the end of 1998; relative holdings obtain a mortgage score. The mortgage score further enlargement of the GSEs’ role in the of the GSEs’ mortgage-backed securities by indicates to the lender either that the GSE multifamily market seems feasible and others actually declined as a share of will accept the mortgage, based on the appropriate in the future. mortgages outstanding, from 29 percent at the application submitted, or that more detailed There are a number of submarkets, such as end of 1991 to 28 percent at the end of 1998. manual underwriting is required to make the the market for mortgages on 5–50 unit The dominant position of the GSEs in the loan eligible for GSE purchase. multifamily properties, where the GSEs have mortgage market is reinforced by their It is estimated that 25–40 percent of the particularly lagged the market. As mentioned relationships with other market institutions. GSEs’ purchases were based on automated above, the GSEs acquired loans representing Commercial banks, mutual savings banks, underwriting in 1999. These systems have 24 percent units multifamily units receiving also been adapted for FHA and jumbo loans. and savings and loans are their competitors conventional financing in 1997, but their They have the potential to reduce the cost of as well as their customers—they compete to acquisitions of loans on small multifamily loan origination, particularly for low-risk the extent they hold mortgages in portfolio, properties represented only about 2 percent loans, but the systems are so new that no of such properties financed that year. but at the same time they sell mortgages to comprehensive studies of their effects have Certainly the GSEs face a number of the GSEs. They also buy mortgage-backed been conducted. As discussed earlier, challenges in better meeting the needs of the securities, as well as the debt securities used concerns about the use of automated multifamily secondary market. For example, to finance the GSEs’ portfolios. Mortgage underwriting include the impact on thrifts and other depository institutions may bankers, who accounted for 58 percent of all minorities and the ‘‘black box’’ nature of the sometimes retain their best loans in portfolio, single-family loans in 1997, sell virtually all score algorithm. and the resulting information asymmetries of their conventional conforming loans to the The GSEs are using their state-of -the-art may act as an impediment to expanded GSEs.220 Private mortgage insurers are closely technology in certain ways to help expand secondary market transaction volume. 217 linked to the GSEs, because mortgages homeownership opportunities. For example, However, the GSEs have demonstrated that purchased by the enterprises that have loan- Fannie Mae has developed FannieMaps, a they have the depth of expertise and the to-value ratios in excess of 80 percent are computerized mapping service offered to financial resources to devise innovative normally required to be covered by private lenders, nonprofit organizations, and state solutions to problems in the multifamily mortgage insurance, in accordance with the and local governments to help them market. GSEs’ charter acts. implement community lending programs.
VerDate 112000 18:02 Oct 30, 2000 Jkt 194001 PO 00000 Frm 00087 Fmt 4701 Sfmt 4700 E:\FR\FM\31OCR2.SGM pfrm08 PsN: 31OCR2 65130 Federal Register / Vol. 65, No. 211 / Tuesday, October 31, 2000 / Rules and Regulations d. Staff Resources Other indicators. Additional indicators of price increases. Over the past seven years, Both Fannie Mae and Freddie Mac are the strength of the GSEs are provided by economic expansion, accompanied by low well-known throughout the mortgage various rankings of American corporations. interest rates and increased outreach on the industry for the expertise of their staffs in One survey found that at the end of 1999 part of the mortgage industry, has improved carrying out their current programs, Fannie Mae was third of all companies in affordability conditions for these families. 223 conducting basic and applied research total assets and Freddie Mac ranked 14th. Between 1993 and 1999, record numbers of regarding mortgage markets, developing Business Week has reported that among lower-income and minority families innovative new programs, and undertaking Standard & Poor’s 500 companies in 1999, purchased homes. First-time homeowners sophisticated analyses that may lead to new Fannie Mae and Freddie Mac respectively have become a major driving force in the programs in the future. The leaders of these ranked 49th and 88th in market value, and home purchase market over the past five 224 corporations frequently testify before 24th and 43rd in total profits. years. Thus, the 1990s have seen the Congressional committees on a wide range of f. Conclusion About Leading the Industry development of a strong affordable lending market. Despite this growth in affordable housing issues, and both GSEs have In light of these considerations, the developed extensive working relationships lending to minorities, disparities in the Secretary has determined that the GSEs have mortgage market remain. For example, with a broad spectrum of mortgage market the ability to lead the industry in making participants, including various nonprofit African-American applicants are still twice mortgage credit available for low- and as likely to be denied a loan as white groups, academics, and government housing moderate-income families. authorities. They also contract with outside applicants, even after controlling for income. leaders in the finance industry for technical H. Factor 6: The Need To Maintain the Several demographic changes will affect expertise not available in-house and for Sound Financial Condition of the GSEs the housing finance system over the next few advice on a wide variety of issues. years. First, the U.S. population is expected HUD has undertaken a separate, detailed to grow by an average of 2.4 million per year e. Financial Strength economic analysis of this final rule, which over the next 20 years, resulting in 1.1 to 1.2 Fannie Mae. The benefits that accrue to the includes consideration of (a) the financial million new households per year. The aging returns that the GSEs earn on low- and GSEs because of their GSE status, as well as of the baby-boom generation and the entry of moderate-income loans and (b) the financial their solid management, have made them two the baby-bust generation into prime home safety and soundness implications of the of the nation’s most profitable businesses. buying age will have a dampening effect on housing goals. Based on this economic Fannie Mae’s net income has increased from housing demand. However, the continued analysis and discussions with the Office of $376 million in 1987 to $1.6 billion in 1992, influx of immigrants will increase the Federal Housing Enterprise Oversight, HUD $3.1 billion in 1997, $3.4 billion in 1998 and demand for rental housing, while those who concludes that the goals raise minimal, if $3.9 billion in 1999—an average annual rate immigrated during the 1980’s will be in the any, safety and soundness concerns. of increase of 22 percent. Through the fourth market for owner-occupied housing. Non- quarter of 1998, Fannie Mae has recorded 48 I. Determination of the Low- and Moderate- traditional households have become more consecutive quarters of increased net income Income Housing Goals important, as overall household formation per share of common equity. Fannie Mae’s The annual goal for each GSE’s purchases rates have slowed. With later marriages, return on equity averaged 24.0 percent over of mortgages financing housing for low- and divorce, and non-traditional living the 1995–99 period—far above the rates moderate-income families is established at 50 arrangements, the fastest growing household achieved by most financial corporations. percent of eligible units financed in each of groups have been single-parent and single- Investors in Fannie Mae’s common stock calendar years 2001, 2002 and 2003. This person households. With continued house have seen their annual dividends per share goal will remain in effect for 2004 and price appreciation and favorable mortgage more than double since 1993, rising from thereafter, unless changed by the Secretary terms, ‘‘trade-up buyers’’ will increase their $1.84 to $4.32 in 1999. If dividends were prior to that time. The goal represents an role in the housing market. These fully reinvested, an investment of $1000 in increase over the 1996 goal of 40 percent and demographic trends will lead to greater Fannie Mae common stock on December 31, the 1997–99 goal of 42 percent. These goals diversity in the homebuying market, which 1987 would have appreciated to $27,983.98 are in the lower portion of the range of will require adaptation by the primary and by December 31, 1997. This annualized total market share estimates of 50–55 percent, secondary mortgage markets. rate of return of 39.5 percent over the decade presented in Appendix D. The Secretary’s As a result of the above demographic exceeded that of many leading U. S. consideration of the six statutory factors that forces, housing starts are expected to average corporations, including Intel (35.9 percent), led to the choice of these goals is 1.5 million units between 2000 and 2004, Coca-Cola (32.4 percent), and General summarized in this section. essentially the same as in 1996–99.226 Electric (24.3 percent). Refinancing of existing mortgages, which Freddie Mac. Freddie Mac has shown 1. Housing Needs and Demographic accounted for 50 percent of originations in similar trends. Freddie Mac’s net income has Conditions 1998 and 34 percent in 1999 are returning to increased from $301 million in 1987 to $622 Data from the 1990 Census and the lower levels during 2000 and 2001 (16 and million in 1992, $1.4 billion in 1997, $1.7 American Housing Surveys demonstrate that 12 percent respectively). billion in 1998 and $2.2 billion in 1999—an there are substantial housing needs among Multifamily Mortgage Market. Since the average annual rate of increase of 18 percent. low- and moderate-income families, early 1990s, the multifamily mortgage market Freddie Mac’s return on equity averaged 23.4 especially among lower-income and minority has become more closely integrated with percent over the 1995–99 period—also well families in this group. Many of these global capital markets, although not to the above the rates achieved by most financial households are burdened by high same degree as the single-family mortgage corporations. homeownership costs or rent payments and market. Loans on multifamily properties Investors in Freddie Mac’s common stock will likely continue to face serious housing remain viewed as riskier than their single- have also seen their annual dividends per problems, given the dim prospects for family counterparts. Property values, vacancy share more than double since 1993, rising earnings growth in entry-level occupations. rates, and market rents in multifamily from $0.88 to $2.40 in 1999. If dividends According to HUD’s ‘‘Worst Case Housing properties appear to be highly correlated were fully reinvested, an investment of $1000 Needs’’ report, 21 percent of owner with local job market conditions, creating in Freddie Mac common stock on December households faced a moderate or severe cost greater sensitivity of loan performance to 29, 1989 would have appreciated to burden in 1997. Affordability problems were economic conditions than may be $8,670.20 by December 31, 1997, for an even more common among renters, with 40 experienced for single-family mortgages. annualized total rate of return of 31.0 percent percent paying more than 30 percent of their Volatility during 1998 in the market for over this period. This was slightly higher income for rent in 1997.225 Commercial Mortgage Backed Securities than the annual return on Fannie Mae Single-family Mortgage Market. Many (CMBS), an important source of financing for common stock (29.9 percent) and younger, minority and lower-income families multifamily properties, underlines the need substantially higher than the average gain in did not become homeowners during the for an ongoing GSE presence in the the S&P Financial-Miscellaneous index (24.1 1980s due to the slow growth of earnings, multifamily secondary market. The potential percent) over the 1990–97 period.222 high real interest rates, and continued house for an increased GSE presence is enhanced
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BILLING CODE 4210±27±C GSEs’ support of lending for the lower- particularly when compared with the Single-family Affordable Lending Market. income end of the market. As shown in corresponding shares for portfolio lenders Despite these gains in goal performance, the Figures A.2 and A.3, the lower-income shares and the primary market. Department remains concerned about the of the GSEs’ purchases are too low,
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This appendix has reached the following low-mod purchases have accounted for only their multifamily purchases to date do not findings with respect to the GSEs’ purchases 34 percent of the low- and moderate-income appear to be contributing to mitigation of the of affordable loans for low- and moderate- single-family units that were financed during excessive cost of mortgage financing for small income families and their communities. that year. multifamily properties, nor have the GSEs • While Fannie Mae and Freddie Mac have In conclusion, the Department’s analysis demonstrated market leadership with regard both improved their support for the single- suggests that the GSEs are not leading the to rehabilitation loans, a segment where family affordable lending market over the single-family market in purchasing loans that financing has sometimes been difficult to past seven years, they have generally lagged qualify for the Low- and Moderate-Income obtain. In conclusion, it appears that both the overall single-family market in providing Goal. There is room for Fannie Mae and GSEs can make improvements in their affordable loans to lower-income borrowers. Freddie Mac to improve their performance in underwriting policies and procedures and This finding is based on HUD’s analysis of purchasing affordable loans at the lower- introduce new products that will enable GSE and HMDA data and on numerous income end of the market. Moreover, them to more effectively serve segments of studies by academics and research evidence suggests that there is a significant the multifamily market that can benefit from organizations. population of potential homebuyers who greater liquidity. • The GSEs show somewhat different might respond well to aggressive outreach by 3. Size of the Mortgage Market for Low- and patterns of mortgage purchases—through the GSEs. Specifically, both Fannie Mae and Moderate-Income Families 1998, Freddie Mac was less likely than the Joint Center for Housing Studies expect Fannie Mae to fund mortgages for lower- immigration to be a major source of future As detailed in Appendix D, the low- and income families. As a result, the percentage homebuyers. Furthermore, studies indicate moderate-income mortgage market accounts of Freddie Mac’s purchases benefiting the existence of a large untapped pool of for 50 to 55 percent of dwelling units historically underserved families and their potential homeowners among the rental financed by conventional conforming neighborhoods was less than the population. Indeed, the GSEs’ recent mortgages. In estimating the size of the corresponding shares of total market experience with new outreach and affordable market, HUD excluded the effects of the B&C originations, while Fannie Mae’s purchases housing initiatives is important confirmation market. HUD also used alternative were closer to the patterns of originations in of this potential. assumptions about future economic and the primary market (see Figure A.3). Multifamily Market. Fannie Mae and, market conditions that were less favorable However, in 1999, Freddie Mac’s purchases especially, Freddie Mac have rapidly than those that existed over the last five of home loans included a higher percentage expanded their presence in the multifamily years. HUD is well aware of the volatility of of low-mod loans than Fannie Mae’s mortgage market in the period since the mortgage markets and the possible impacts of purchases (40.0 percent and 39.3 percent, passage of FHEFSSA. The Senate report on changes in economic conditions on the GSEs’ respectively). It remains to be seen whether this legislation in 1992 referred to the GSEs’ ability to meet the housing goals. Should this represents a new trend for Freddie Mac, activities in the multifamily arena as conditions change such that the goals are no or a temporary reversal of the pattern for the ‘‘troubling,’’ citing Freddie Mac’s September longer reasonable or feasible, the Department 1996–98 period. 1990 suspension of its purchases of new has the authority to revise the goals. • A study by The Urban Institute of lender multifamily mortgages and criticism of 4. The Low- and Moderate-Income Housing experience with the GSEs’ underwriting Fannie Mae for ‘‘creaming’’ the market.228 Goals for 2001–03 guidelines finds that the enterprises had Freddie Mac has successfully rebuilt its There are several reasons why the stepped up their outreach efforts and multifamily acquisition program, as shown Secretary is increasing the Low- and increased the flexibility in their standards to by the increase in its purchases of Moderate-Income Housing Goal from 42 better accommodate the special multifamily mortgages from $27 million in percent in 1997–99 to 50 percent of eligible circumstances of lower-income borrowers. 1992 to $7.6 billion in 1999. As a result, units financed in each of calendar years However, this study concluded that the concerns regarding Freddie Mac’s 2001, 2002 and 2003. GSEs’ guidelines remain somewhat inflexible multifamily capabilities no longer constrain First, when the 1996–99 goals were and that the enterprises are often hesitant to their performance with regard to low- and established in December 1995, Freddie Mac purchase affordable loans. Lenders also told moderate-income families in the manner that had only recently reentered the multifamily The Urban Institute that Fannie Mae has been prevailed at the time of the December 1995 mortgage market, after its absence in the early more aggressive than Freddie Mac in market rule. 1990s. Freddie Mac has rebuilt its outreach to underserved groups, in offering Fannie Mae never withdrew from the multifamily acquisition program over the new affordable products, and in adjusting its multifamily market, but it has also stepped past several years, with its 1999 purchases at underwriting standards. up its activities in this area substantially, a level more than eight times what they were • A large percentage of the lower-income with multifamily purchases rising from $3.0 in 1994 (in dollar terms). The limited role of loans purchased by the enterprises have billion in 1992 to $9.4 billion in 1999. Freddie Mac in the multifamily market was relatively high down payments, which raises Holding 12.8 percent of the outstanding stock a significant constraint in setting the Low- questions about whether the GSEs are of multifamily mortgage debt and guarantees and Moderate-Income Housing Goals for adequately meeting the needs of lower- as of the end of 1999, Fannie Mae is regarded 1996–99. Freddie Mac’s return as a major income families have difficulty raising as an influential force within the multifamily participant in the multifamily market was an enough cash for a large down payment. market. Fannie Mae’s multifamily important factor in the improvement in its • There are important parts of the single- underwriting standards have been widely performance on the Low- and Moderate- family market where the GSEs have played emulated throughout the multifamily Income Housing Goal, as shown in Figure a minimal role. For example, single-family mortgage market. A.1, and it removes an impediment to higher rental properties are an important source of The increased role of Fannie Mae and goals for both GSEs. These goals will create low-income housing, but they represent only Freddie Mac in the multifamily market has new opportunities for the GSEs to further a small portion of the GSEs’ business. GSE major implications for the Low- and step up their support of mortgages on purchases have accounted for only 14 Moderate-Income Housing Goal, since a very properties with rents affordable to low- and percent of the single-family rental units that high percentage of multifamily units have moderate-income families. However, as received financing in 1997. An increased rents which are affordable to low- and discussed in the Preamble, to encourage presence by Fannie Mae and Freddie Mac moderate-income families. However, the Freddie Mac to further step up its role in the would bring lower interest rates and liquidity potential of the GSEs to lead the multifamily multifamily market, the Secretary is to this market, as well as improve their goals mortgage industry has not been fully proposing a ‘‘temporary adjustment factor’’ performance. developed. As reported earlier in Table A.7a, for its purchases of loans on properties with • The above points can be summarized by the GSEs’ purchases (through 1999) have more than 50 units. Specifically, each unit in examining the GSEs’ share of the single- accounted for only 24 percent of the such properties would be weighted as 1.2 family mortgage market. The GSEs’ total multifamily units that received financing units in the numerator of the housing goal purchases have accounted for 44 percent of during 1997. Standard & Poor’s recently percentage for both the Low and Moderate all single-family (both owner and rental) described both GSEs’ multifamily lending as Income Goal and the Special Affordable units financed during 1997; however, their ‘‘extremely conservative.’’ 229 In particular, Housing Goal for the years 2001–2003.
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Second, the single-family affordable market pattern holds for 1998. Thus the Secretary a leadership role in providing financing for had only recently begun to grow in 1993 and believes that the GSEs can do more to raise such properties.231 1994, the latest period for which data was the low- and moderate-income shares of their Finally, a wide variety of quantitative and available when the 1996–99 goals were mortgages on these properties. This can be qualitative indicators indicate that the GSEs’ established in December 1995. But the accomplished by building on various have the financial strength to improve their historically high low-and moderate-income programs that the enterprises have already affordable lending performance. For example, share of the primary mortgage market started, including (1) their outreach efforts, combined net income has risen steadily over attained in 1994 has been maintained over (2) their incorporation of greater flexibility the last decade, from $1.244 billion in 1989 the 1995–98 period. The three-year average into their underwriting guidelines, (3) their to $6.135 billion in 1999, an average annual estimate of the low- and moderate-income purchases of seasoned CRA loans, (4) their growth rate of 17 percent per year. This share of the single-family owner mortgage entry into new single-family mortgage financial strength provides the GSEs with the market was 38 percent for 1992–94, but 42 markets such as loans on manufactured resources to lead the industry in supporting percent for 1995–98 and 41 percent for the housing, (5) their increased purchases of mortgage lending for units affordable to low- 1992–98 period as a whole. The continued loans on small multifamily properties, and and moderate-income families. high affordability of housing suggests that a (6) their increased presence in other rental Summary. Figure A.7a summarizes many strong low-income market continued for a markets where they have had only a limited of the points made in this section regarding sixth straight year in 1999. Current economic forecasts suggest that housing affordability presence in the past. opportunities for Fannie Mae and Freddie could be maintained in the post-2000 period, Third, one particular area where the GSEs Mac to improve their overall performance on leading to additional opportunities for the could play a greater role is in the mortgage the Low- and Moderate-Income Goal. The GSEs to support mortgage lending benefiting market for single-family rental dwellings. GSEs’ purchases have provided financing for low- and moderate-income families.230 And These properties, containing 1–4 rental units, 2,948,712 (or 40 percent) of the 7,306,950 various surveys indicate that the demand for are an important source of housing for low- single-family and multifamily units that were homeownership by minorities, immigrants, and moderate-income families, but the GSEs financed in the conventional conforming and younger households will remain strong have not played a major role in this mortgage market during 1997. However, in the low- for the foreseeable future. market—they accounted for only 6.5 percent and moderate-income part of the market, the Although single-family owner 1-unit of units financed by Fannie Mae and 6.4 1,330,516 units that were financed by GSE properties comprise the ‘‘bread-and-butter’’ percent of units financed by Freddie Mac in purchases represented only 32 percent of the of the GSEs’ business, evidence presented 1997. The Department believes that the GSEs’ 4,201,287 dwelling units that were financed above demonstrates that the shares of their role in financing loans on such properties, in the market. Thus, there appears to ample loans for low- and moderate-income families which are generally owned by ‘‘mom and room for the GSEs to increase their purchases taking out loans on such properties lag the pop’’ businesses, can and should be of loans that qualify for the Low- and corresponding shares for the primary market. enhanced, though it recognizes that single- Moderate-Income Goal. Examples of specific For example, in 1997 the Department finds family rental properties are very market segments that would particularly that these shares amounted to 34.1 percent heterogeneous, making it more difficult to benefit from a more active secondary market for Freddie Mac, 37.6 percent for Fannie develop standardized underwriting standards have been provided throughout this Mae, and 42.5 percent for the primary for the secondary market. But the Secretary appendix. market; as shown in Figure A.3, a similar believes that the GSEs can do more to play BILLING CODE 4910±27±P
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BILLING CODE 4910±27±C
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5. Conclusions Bureau of the Census, Current Housing 28 A detailed discussion of the GSEs’ Having considered the projected mortgage Reports H121/93–3, (July 1993), p. ix. activities in this area is contained in Theresa 16 market serving low- and moderate-income Donald S. Bradley and Peter Zorn. ‘‘Fear R. Diventi, The GSEs’ Purchases of Single- families, economic, housing and of Homebuying: Why Financially Able Family Rental Property Mortgages, Housing demographic conditions for 2001–03, and the Households May Avoid Ownership,’’ Finance Working Paper No. HF–004, Office GSEs’ recent performance in purchasing Secondary Mortgage Markets (1996). of Policy Development and Research, mortgages for low- and moderate-income 17 Munnell, Alicia H., Geoffrey M. B. Department of Housing and Urban families, the Secretary has determined that Tootell, Lynn E. Browne, and James Development, (March 1998). 29 the annual goal of 50 percent of eligible units McEneaney, ‘‘Mortgage Lending in Boston: One program that shows promise is financed in each of calendar years 2001, 2002 Interpreting HMDA Data,’’ American Fannie Mae’s HomeStyle Home Improvement and 2003 is feasible. Moreover, the Secretary Economic Review. 86 (March 1996). Mortgage Loan Product. Under this program, has considered the GSEs’ ability to lead the 18 William C. Hunter. ‘‘The Cultural Fannie Mae will purchase mortgages that industry as well as the GSEs’ financial Affinity Hypothesis and Mortgage Lending finance the purchase and rehabilitation of 1- condition. The Secretary has determined that Decisions,’’ WP–95–8, Federal Reserve Bank to 4-unit properties in ‘‘as-is’’ condition. The the goal is necessary and appropriate. of Chicago, (1995). In addition, a study mortgage amount is limited to 90 percent of undertaken for HUD also found higher denial the appraised ‘‘as-completed’’ value, with the Endnotes to Appendix A rates among FHA borrowers for minorities rehab amount not to exceed 50 percent of this 1 See ‘‘Freddie’s Subprime Wrap Business after controlling for credit risk. See Ann B. value. Blooms in 1999’’, Inside B&C Lending, Schnare and Stuart A. Gabriel. ‘‘The Role of 30 See Drew Schneider and James Follain, December 27, 1999, pages 8–9. FHA in the Provision of Credit to ‘‘A New Initiative in the Federal Housing 2 See Jim Berkovec and Peter Zorn, ‘‘How Minorities,’’ ICF Incorporated, Prepared for Administration’s Office of Multifamily Complete is HMDA? HMDA Coverage of the U.S. Department of Housing and Urban Housing Programs: An Assessment of Small Freddie Mac Purchases,’’ The Journal of Real Development, (April 25, 1994). Projects Processing,’’ Cityscape: A Journal of Estate Research, Vol. II, No. 1, Nov. 1, 1996. 19 See Charles W. Calomiris, Charles M. Policy Development and Research 4 (1), 3 U.S. Department of Housing and Urban Kahn and Stanley D. Longhofer. ‘‘Housing (1998), pp. 43–58; and William Segal and Development, Office of Federal Housing Finance Intervention and Private Incentives: Christopher Herbert, Segmentation of the Enterprise Oversight, ‘‘Risk-Based Capital’’ Helping Minorities and the Poor,’’ Journal of Multifamily Mortgage Market: The Case of (Notice of Proposed Rulemaking), Federal Money, Credit and Banking. 26 (August Small Properties, paper presented to annual Register, April 13, 1999, p. 18116. 1994), pp. 634–74, for more discussion of this meetings of the American Real Estate and 4 Fannie Mae (2000), p. 102. phenomenon, which is called ‘‘statistical Urban Economics Association, (January 5 OFHEO NPR, Ibid. discrimination.’’ 2000). 6 31 These costs have been estimated at Mortgage denial rates are based on 1998 20 The FICO score, developed by Fair, Isaac $30,000 for a typical transaction. HMDA data; manufactured housing lenders and Company, is summary index of an Presentation by Jeff Stern, Vice President, are excluded from these comparisons. individual’s credit history. The FICO score is 7 Enterprise Mortgage Investments, HUD GSE U.S. Department of Housing and Urban based on elements from the applicant’s credit Working Group, July 23, 1998. The most Development. Rental Housing Assistance— report, such as number of delinquencies in The Worsening Crisis: A Report to Congress comprehensive account of the multifamily the past year, number of trade lines, and the housing finance system as it relates to small on Worst Case Housing Needs. (March 2000). amount owed on trade lines as compared to 8 ‘‘Final Report of Standard & Poor’s to the properties is contained in Schneider and the available maximum credit limits. The Follain (see above reference). Office of Federal Housing Enterprise FICO score is said to reflect the credit risk Oversight,’’ February 3, 1997; Freddie Mac, 32 This measure is discussed in Paul B. of the applicant and a score of 620 is often Manchester, ‘‘A New Measure of Labor 1998 Annual Report to Shareholders, p. 6. cited as a threshold between being an 9 Freddie Mac reported delinquency rates Market Distress,’’ Challenge, (November/ acceptable and an unacceptable credit risk. of 0.14% for multifamily and 0.39% for December 1982). 21 Section 3.b of this appendix provides a single-family in 1999 (1999 Annual Report to 33 Homeownership rates prior to 1993 are further discussion of automated Shareholders, p. 23.) Fannie Mae reported not strictly comparable with those beginning underwriting. in 1993 because of a change in weights from ‘‘serious delinquency rates’’ of 0.12% for 22 multifamily and 0.48% for single-family in Robert B. Avery, Patricia E. Beeson and the 1980 Census to the 1990 Census. 1999 (1999 Annual Report to Shareholders, Mark E. Sniderman. Understanding Mortgage 34 All of the home sales data in this section p. 27). Markets: Evidence from HMDA, Working are obtained from U.S. Housing Market 10 According to the National Association of Paper Series 94–21. Federal Reserve Bank of Conditions, 1st Quarter 2000, U.S. Realtors, Housing Market Will Change in New Cleveland (December 1994). Department of Housing and Urban 23 Millennium as Population Shifts, (November Rental Housing Assistance—The Development, (May 2000). 7, 1998), 45 percent of U.S. household wealth Worsening Crisis: A Report to Congress on 35 Existing home sales, housing starts, is in the form of home equity in 1998. Since Worst Case Housing Needs, Department of housing affordability and 30-year fixed rate 1968, home prices have increased each year, Housing and Urban Development, (March mortgage rate forecasts are obtained from on average, at the rate of inflation plus up to 2000), p. i. All statistics in this subsection are Standard & Poor’s DRI, The U.S. Economy. two percentage points. taken from this report, except as noted. (June 2000), pp. 55–7. While DRI provides 11 Joint Center for Housing Studies of 24 Very low-income households are defined forecasts through 2004, one should obviously Harvard University. State of the Nation’s in the report as those whose income, adjusted interpret them with care. Housing 2000. (2000), p. 9. for family size, is less than 50 percent of area 36 Real GDP, unemployment, inflation, and 12 Joint Center for Housing Studies of median income. This differs from the treasury note interest rate projections are Harvard University. (2000), p. 33. definition adopted by Congress in the GSE obtained for fiscal years 2000–2009 from The 13 Michelle J. White, and Richard K. Green. Act of 1992, which uses a cutoff of 60 percent Economic and Budget Outlook: An Update, ‘‘Measuring the Benefits of Homeowning: and which does not adjust income for family Washington DC: Congressional Budget Office, Effects on Children,’’ Journal of Urban size for owner-occupied dwelling units. (July 2000). Economics. 41 (May 1997), pp. 441–61. Also 25 Edward N. Wolff, ‘‘Recent Trends in the 37 Standard & Poor’s DRI, The U.S. see ‘‘The Social Benefits and Costs of Size Distribution of Household Wealth,’’ The Economy. (June 2000), pp. 31 and 56. Homeownership: A Critical Assessment of Journal of Economic Perspectives, 12( 3), 38 Standard & Poor’s DRI, The U.S. the Research,’’ Working Paper No. 00–01, (Summer 1998), p. 137. Economy. (June 2000), p. 56. Research Institute for Housing America, May 26 Joint Center for Housing Studies, The 39 Mortgage Bankers Association of 2000. State of the Nation’s Housing: 2000, June America. MBA Mortgage Finance Forecast, 14 Joint Center for Housing Studies of 2000, p. 24. (July 14, 2000). Harvard University. State of the Nation’s 27 Rent is measured in this report as gross 40 Fannie Mae. Berson’s Housing and Housing 1998 (1998). rent, defined as contract rent plus the cost of Economic Report, (June 2000). 15 Howard Savage and Peter Fronczek, Who any utilities which are not included in 41 National Association of Realtors. Can Afford to Buy A House in 1991?, U.S. contract rent. Housing Market Will Change in New
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Millennium as Population Shifts. (November 61 Other sources of data on loan-to-value GSE purchases, and 27.8 percent of home 7, 1998). ratios such as the American Housing Survey purchase mortgages originated in the 42 Homeownership rates do not peek until and the Chicago Title and Trust Company conventional conforming market. population groups reach 65 to 74 years of indicate that high-LTV mortgages are 78 FHA, which focuses on first-time age. Since the baby-boom population is such somewhat more common in the primary homebuyers and low down payment loans, a large cohort, even though they will be past market than the Finance Board’s survey. experiences higher mortgage defaults than their homebuying peak, it is possible they However, the Chicago Title survey does not conventional lenders and the GSEs. Still, the will still have an impact. separate FHA-insured loans from FHA system is actuarially sound because it 43 Joint Center for Housing Studies of conventional mortgages. charges an insurance premium that covers Harvard University. State of the Nation’s 62 Refinancing data is taken from Freddie the higher default costs. Housing 2000. (2000), p. 11. Mac’s monthly Primary Mortgage Market 79 FHA’s role in the market is particularly 44 Joint Center for Housing Studies of Survey. important for African-American and Harvard University. State of the Nation’s 63 There is some evidence that lower- Hispanic borrowers. As shown in Table A.1c, Housing 1998. (1998), p. 14. income borrowers did not participate in the FHA insured 44 percent of all 1997 home 45 Joint Center for Housing Studies of 1993 refinance boom as much as higher- loan originations for these borrowers. Harvard University. (1998), p. 15. income borrowers—see Paul B. Manchester, 80 It should be noted that Tables A.1a and 46 National Association of Realtors. Characteristics of Mortgages Purchased by A.1b include only the GSEs’ purchases of Housing Market Will Change in New Fannie Mae and Freddie Mac: 1996–97 conventional loans; the same tables in the Millennium As population Shifts. (November Update, Housing Finance Working Paper No. proposed rule also included the GSEs’ 7, 1998). HF–006, Office of Policy Development and purchases of government (particularly FHA- 47 Joint Center for Housing Studies of Research, Department of Housing and Urban insured) loans. Harvard University. (1998). Development, (August 1998), pp. 30–32. 81 See Green and Associates. Fair Lending 48 John R. Pitkin and Patrick A. Simmons. 64 Housing affordability varies markedly in Montgomery County: A Home Mortgage ‘‘The Foreign-Born Population to 2010: A between regions, ranging in May 2000 from Lending Study, a report prepared for the Prospective Analysis by Country of Birth, 147 in the Midwest to 93 in the West, with Montgomery County Human Relations Age, and Duration of U.S. Residence,’’ the South and Northeast falling in between. Commission, (March 1998). Journal of Housing Research. 7(1) (1996), pp. 65 Fannie Mae, http:// 82 However, as shown in Table A.1a, 1–31. www.fanniemae.com/news/housingsurvey/ depository institutions resemble other 49 Fred Flick and Kate Anderson. ‘‘Future 1998, (July 16, 1998). conventional lenders in their relatively low of Housing Demand: Special Markets,’’ Real 66 U.S. Department of Commerce, Bureau of level of originating loans for African- Estate Outlook. (1998), p. 6. the Census, Money Income of Households, American, Hispanic and minority borrowers. 50 Mark A. Calabria. ‘‘The Changing Picture Families, and Persons in the United States: 83 For an analysis of the impact of CRA of Homebuyers,’’ Real Estate Outlook. (May 1992, Special Studies Series P–60, No. 184, agreements signed by lending institutions, 1999), p. 10. Table B–25, (October 1993). see Alex Schwartz, ‘‘From Confrontation to 51 Chicago Title and Trust Family of 67 Chicago Title and Trust Family of Collaboration? Banks, Community Groups, Insurers, Who’s Buying Homes in America. (2000). Insurers, Who’s Buying Homes in America, and the Implementation of Community 52 (1998). Reinvestment Agreements’’, Housing Policy Chicago Title and Trust Family of 68 Insurers, Who’s Buying Homes in America. Single-family originations rose by 10 Debate, 9(3), (1998), pp. 631–662. Also see (1998 and 2000). percent in dollar terms in 1997, but the the Department of Treasury CRA study by 53 Calabria. (May 1999), p. 11. Mortgage Bankers Association estimates that Litan et al., op cit. 84 54 U.S. Census Bureau, Current Population they fell by 0.6 percent in terms of the ‘‘With Securities Market Back on Track, Reports, P60–206, Money Income in the number of loans. Analysts Expect Surge in CRA Loan 69 United States: 1998, U.S. Government Mortgage market projections obtained Securitization in 1999,’’ Inside MBS & ABS. Printing Office, Washington, DC, (1999). from the MBA’s MBA Mortgage Finance (February 19, 1999), pp. 11–12. 85 55 Joint Center for Housing Studies of Forecast, (July 14, 2000). Inside MBS & ABS. (February 19, 1999), 70 Harvard University. State of the Nation’s Fannie Mae. Berson’s Housing and p. 12. 86 Housing 1998. (1998). Economic Report, (June 2000). Fannie Mae. 1997 Annual Housing 71 56 Data for 1990–97 from U.S. Housing Speech before the annual convention of Activities Report, (1998), p. 28. 87 Market Conditions, 1st Quarter 1999, U.S. the National Association of Home Builders in For an analysis of the GSEs’ CRA Department of Housing and Urban Dallas TX, (January 1999). purchases, see the HUD-sponsored study by Development, (May 1999), Table 17; data for 72 Fannie Mae News Release (January the Urban Institute, An Assessment of Recent 1998–99 from the Mortgage Bankers 1999). Innovations in the Secondary Market for Association. 73 Freddie Mac News Release (January 15, Low- and Moderate-Income Lending, by 57 Interest rates in this section are effective 1999). Kenneth Temkin, Jennifer E.H. Johnson, and rates paid on conventional home purchase 74 Standard underwriting procedures Charles Calhoun, March 2000. mortgages on new homes, based on the characterize a property in a declining 88 George Galster, Laudan Y. Aron, Peter Monthly Interest Rate Survey (MIRS) neighborhood as one at high risk of losing Tatain and Keith Watson. Estimating the conducted by the Federal Housing Finance value. Implicitly, these underwriting Size, Characteristics, and Risk Profile of Board and published by the Council of standards presume that the real estate market Potential Homebuyers. Washington: The Economic Advisers annually in the Economic is inefficient in economic terms, that is, Urban Institute, (1995). Report Prepared for Report of the President and monthly in prices do not reflect all available information. the Department of Housing and Urban Economic Indicators. These are average rates 75 For an update of this analysis to include Development. for all loan types, encompassing 30-year and 1998, see Randall M. Scheessele, 1998 HMDA 89 Fannie Mae Foundation. African 15-year fixed-rate mortgages and adjustable Highlights, Housing Finance Working Paper American and Hispanic Attitudes on rate mortgages. HF–009, Office of Policy Development and Homeownership: A Guide for Mortgage 58 U.S. Housing Market Conditions, 1st Research, U.S. Department of Housing and Industry Leaders, (1998), p. 3. Quarter 2000, (May 2000), Table 14. Urban Development, (October 1999). 90 Fannie Mae Foundation. (1998), p. 14. 59 All statistics in this section are taken 76 The ‘‘overall’’ market is defined as all 91 Robert B. Avery, Raphael W. Bostic, Paul from the Federal Housing Finance Board’s loans (including both government and S. Calem, and Glenn B. Canner, Credit MIRS. conventional) below the 1997 conforming Scoring: Issues and Evidence from Credit 60 This is discussed in more detail in Paul loan limit of $214,600 and the 1998 Bureau Files, mimeo., (1998). Bennett, Richard Peach, and Stavros conforming loan limit of $227,150. 92 Avery et al. (1998), p. 24. Peristani, Structural Change in the Mortgage 77 The percentages reported in Table A.1a 93 Kenneth Temkin, Roberto Quercia, Market and the Propensity to Refinance, Staff for the year 1998 are similar; in that year, George Galster, and Sheila O’Leary, A Study Report Number 45, Federal Reserve Bank of low-income borrowers accounted for 49.1 of the GSEs’ Single Family Underwriting New York, (September 1998). percent of FHA-insured loans, 23.9 percent of Guidelines: Final Report. Washington DC:
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U.S. Department of Housing and Urban Manufactured Housing, Joint Center for for Affordable Rental Housing: Lessons From Development, (April 1999). This study Housing Studies, Harvard University, the LIMAC/Freddie Mac and EMI/Fannie involves an analysis of the GSEs’ (January 1997). Mae Programs,’’ Cityscape: A Journal of underwriting guidelines in general. This 110 Data on industry shipments and sales Policy Development and Research, 4(1), section reviews only the aspects of the study has been obtained from ‘‘U.S. Housing (1998), pp. 19–41. related to mortgage scoring. A broader review Market Conditions,’’ U.S. Department of 118 Drew Schneider and James Follain of this paper is provided below in section Housing and Urban Development (May, assert that interest rates on small property E.4. 2000), p. 49. mortgages are as high as 300 basis points over 94 Temkin, et al. (1999), p. 2. 111 Although the terms are sometimes used comparable maturity Treasuries in ‘‘A New 95 Temkin, et al. (1999), p. 5; pp. 26–27. interchangeably, manufactured housing and Initiative in the Federal Housing 96 Standard & Poor’s B and C mortgage mobile homes differ in significant ways Administration’s Office of Multifamily guidelines can be used to illustrate that relative to construction standards, mobility, Housing Programs: An Assessment of Small underwriting criteria in the subprime market permanence, and financing (These Projects Processing,’’ Cityscape: A Journal of becomes more flexible as the grade of distinctions are spelled out in detail in Policy Development and Research 4(1): 43– borrower moves from the most creditworthy Donald S. Bradley, ‘‘Will Manufactured 58, 1998. Berkshire Realty, a Fannie Mae A-borrowers to the riskier D borrowers. For Housing Become Home of First Choice?’’ Delegated Underwriting and Servicing (DUS) Example, the A-grade borrower is allowed to Secondary Mortgage Markets, (July 1997)). lender based in Boston, was quoting spreads be delinquent 30 days on his mortgage twice Mobile homes are not covered by national of 135 to 150 basis points in ‘‘Loans in the last year whereas the D grade borrower construction standards, though they may be Smorgasbord,’’ Multi-Housing News, is allowed to be delinquent 30 days on his subject to State or local siting requirements. August–September 1996. Additional mortgage credit five times in the last year. Manufactured homes must be built according information on the interest rate differential Moreover, the A-borrower is permitted to to the National Manufactured Housing between large and small multifamily have a 45 percent debt-to-income ratio Construction Safety and Standards Act of properties is contained in William Segal and compared to the D grade borrower’s 60 1974. In accordance with this act, HUD Christopher Herbert, Segmentation of the percent. developed minimum building standards in Multifamily Mortgage Market: The Case of 97 ‘‘Subprime Product Mix, Strategies 1976 and upgraded them in 1994. Small Properties, paper presented to annual Changed During a Turbulent 1998,’’ Inside Manufactured homes, like mobile homes, are meetings of the American Real Estate and B&C Lending. (December 21, 1998), p. 2. constructed on a permanent chassis and Urban Economics Association, (January 98 ‘‘Renewed Attack on ‘Predatory’ include both axles and wheels. However, 2000). Subprime Lenders.’’ Fair Lending/CRA with manufactured housing, the axles and 119 On the relation between age of property Compass, (June 1999) and http://cra- wheels are intended to be removed at the and quality classification see Jack Goodman time the unit is permanently affixed to a cn.home.mindspring.com. and Brook Scott, ‘‘Rating the Quality of foundation. Manufactured homes, unlike 99 See Randall M. Scheessele. 1998 HMDA Multifamily Housing,’’ Real Estate Finance, mobile homes, are seldom, if ever, moved. Highlights, Housing Finance Working Paper (Summer, 1997). Mobile homes are financed with personal HF–009, Office of Policy Development and 120 W. Donald Campbell. Seniors Housing property loans, but manufactured homes are Research, U.S. Department of Housing and Finance, prepared for American Association eligible for conventional-mortgage financing Urban Development, (October 1999). if they are located on land owned by or under of Retired Persons White House Conference Nonspecialized lenders such as banks and long-term lease to the borrower. Other types on Aging Mini-Conference on Expanding thrifts also make subprime loans, but no data of factory-built housing, such as modular and Housing Choices for Older People, (January is available to estimate the number of these panelized homes, are not included in this 26–27, 1995). 121 loans. definition of ‘‘manufactured housing.’’ These James R. Follain and Edward J. 100 Freddie Mac, We Open Doors for housing types are often treated as ‘‘site built’’ Szymanoski. ‘‘A Framework for Evaluating America’s Families, Freddie Mac’s Annual for purposes of eligibility for mortgage Government’s Evolving Role in Multifamily Housing Activities Report for 1997, (March financing. Mortgage Markets,’’ Cityscape: A Journal of 16, 1998), p. 23. 112 Freddie Mac, the Manufactured Policy Development and Research 1(2), 101 The statistics cited for the ‘‘market’’ Housing Institute and the Low Income (1995), p. 154. 122 refer to all conforming conventional Housing Fund have formed an alliance to Despite sustained economic expansion, mortgages (both home purchase and utilize manufactured housing along with however, the rise in homeownership, has not refinance). The data for the subprime market permanent financing and secondary market fallen below 9 percent in recent years. (Regis are for 200 lenders that specialize in such involvement to bring affordable, attractive J. Sheehan, ‘‘Steady Growth,’’ Units, loans; see Scheessele, op. cit. housing to underserved, low- and moderate- (November/December 1998), pp. 40–43). 102 Alternative—A (or Alt—A) mortgages income urban neighborhoods. Origination Regarding rents and vacancy rates see also are made to prime borrowers who desire low News. (December 1998), p. 18. Ted Cornwell. ‘‘Multifamily Lending down payments or do not want to provide 113 Mortgage-Backed Securities Letter. Approaches Record Level,’’ National full documentation for loans. (September 7, 1998), p. 3. Mortgage News, (September 23, 1996); and 103 Freddie Mac and Standard & Poor’s 114 The Mortgage Market Statistical Annual David Berson, Monthly Economic and tested the new module in a pilot during early for 2000 (Washington, DC: Inside Mortgage Mortgage Market Report, Fannie Mae, 1996 and marketed it to lenders at the end Finance Publications), 1, 286. A conventional (November 1998). of that year. multifamily mortgage market of $46 billion is 123 American Council of Life Insurance 104 See ‘‘Freddie’s Subprime Wrap assumed in this calculation. B and C data reported in Inside MBS & ABS, (March Business Blooms in 1999’’, Inside B&C mortgages are excluded from the calculation. 20, 1998). Lending, December 27, 1999, pages 8–9. 115 The Mortgage Market Statistical Annual 124 A November, 1998 ‘‘Review of the 105 David A. Andrukonis, ‘‘Entering the for 2000 (Washington, DC: Inside Mortgage Short-Term Supply/Demand Conditions for Subprime Arena,’’ Mortgage Banking, May Finance Publications), 1, 286. A conventional Apartments’’ by Peter P. Kozel of Standard 2000, pages 57–60. multifamily mortgage market of $46 billion is and Poor’s concludes that ‘‘in some markets, 106 The figures include their purchases of assumed in this calculation. B and C the supply of units exceeds the likely level Alt A mortgages. Inside B&C Lending, May mortgages are excluded from the calculation. of demand, and in only a few MSAs should 22, 2000, page 12. 116 This calculation incorporates GSE the pace of development accelerate.’’ See also 107 See Lederman, et al., op cit. multifamily transactions involving loans ‘‘Apartment Projects Find Lenders Are Ready 108 For an explanation of the GSEs funding originated during 1997 and acquired during with Financing,’’ Lew Sichelman, National advantage see ‘‘Government Sponsorship of 1997–1999. A multifamily conventional Mortgage News, (April 14, 1997); Commercial FNMA and FHLMC,’’ United States origination market of $38 billion and a per- Lenders Warned That They Could Spur Department of the Treasury, July 11, 1996. unit loan amount of $27,266 is assumed per Overbuilding, National Mortgage News, 109 A detailed discussion of manufactured Appendix D. (March 30, 1998); ‘‘Multifamily, Commercial housing is contained in Kimberly Vermeer 117 Jean L. Cummings and Denise Markets Grow Up,’’ Neil Morse, Secondary and Josephine Louie, The Future of DiPasquale, ‘‘Developing a Secondary Market Marketing Executive, (February 1998);’’
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‘‘Recipe for Disaster,’’ National Mortgage Finance, (Winter 1997); ‘‘The Multifamily 149 ‘‘Fannie Mae Announces New 5–50(SM) News editorial, (July 6, 1998). Outlook,’’ Jack Goodman, Urban Land, Streamlined Mortgage for Small Multifamily 125 1998 Survey of Credit Underwriting (November 1998). Properties is Now Available Through DUS Practices, Comptroller of the Currency, 135 U.S. Housing Market Conditions, U.S. Lenders; 10-Year Volume Goal is $18 National Credit Committee. ‘‘For the fourth Department of Housing and Urban Billion,’’ Fannie Mae press release, May 10, consecutive year, underwriting standards for Development (May 2000), Table 4. 2000. commercial loans have eased,’’ states the 136 Howard Esaki, a principal in CMBS 150 Data from the HUD Property Owners OCC report. ‘‘Examiners again cite Research at Morgan Stanley Dean Witter and Managers Survey (POMS) suggests that, competitive pressure as the primary reason stated at a recent conference that volatility in in and of itself, the GSEs’ emphasis on for easing underwriting standards.’’ The global markets contributed to a 10–20 percent refinance loans may roughly track that of the weakening of underwriting practices is decline in commercial real estate values in overall market. especially concentrated in commercial real late 1998. John Hackett, ‘‘CRE Seen Down 151 Standard & Poor’s described Fannie estate lending according to a the Federal 10% to 20%,’’ National Mortgage News, Mae’s multifamily lending as ‘‘extremely Deposit Insurance Corporation’s Report on (November 23, 1998), p. 1. conservative’’ in ‘‘Final Report of Standard & Underwriting Practices, (October 1997– 137 John Holusha, ‘‘As Financing Pool Dries Poor’s to the Office of Federal Housing March 1998). See also Donna Tanoue, Up, Some See Opportunity,’’ New York Enterprise Oversight (OFHEO),’’ (February 3, ‘‘Underwriting Concerns Grow,’’ National Times, November 1, 1998. 1997), p. 10. Mortgage News, (September 21, 1998), and 138 Federal Reserve Bulletin, June 2000, A 152 See William Segal and Edward J. ‘‘Making the Risk-Takers Pay,’’ National 35. Szymanoski. ‘‘Fannie Mae, Freddie Mac, and Mortgage News, (October 12, 1998). 139 1997 Annual Housing Activity Reports, the Multifamily Mortgage Market,’’ 126 On the effects of multifamily mortgage Table 1. Cityscape: A Journal of Policy Development securitization see ‘‘Financing Multifamily 140 William Segal and Edward J. and Research, vol. 4, no. 1 (1998), pp. 59– Properties: A Play With new Actors and New Szymanoski. The Multifamily Secondary 91. Lines,’’ Donald S. Bradley, Frank E. Nothaft, Mortgage Market: The Role of Government- 153 Freddie Mac’s policy of re-underwriting and James L. Freund, Cityscape, A Journal of Sponsored Enterprises. Housing Finance each multifamily acquisition is a response to Policy Development and Research, vol. 4, No. Working Paper No. HF–002, Office of Policy widespread defaults affecting its multifamily 1 (1998); and ‘‘Financing Multifamily Development and Research, Department of portfolio during the late 1980s according to Properties,’’ Donald S. Bradley, Frank E. Housing and Urban Development, (March Follain and Szymanoski (1995). 1997). 154 A more detailed discussion of Nothaft, and James L. Freund, Urban Land 141 (November 1998). HUD analysis of GSE loan-level data. underwriting guidelines is contained in the 142 Fundingnotes, Vol. 3, Issue 9; analysis below regarding Factor 5, ‘‘The 127 CMBS Database, Commercial Mortgage (September 1998), Eric Avidon, GSEs’’ Ability to Lead the Industry.’’ Alert, Harrison-Scott Publications, Hoboken, ‘‘PaineWebber Lauds Fannie DUS Paper,’’ 155 The term ‘‘affordable lending’’ is used NJ. National Mortgage News, (September 14, generically here to refer to lending for lower- 128 ‘‘New CMBS Headache: B-Piece Market 1998),p. 21. income families and neighborhoods that have Softens,’’ Commercial Mortgage Alert, 143 There is evidence that the GSEs have historically been underserved by the (September 21, 1998); ‘‘Criimi Bankruptcy benefited from recent widening in CMBS mortgage market. Accelerates CMBS Freefall,’’ Commercial spreads because of their funding cost 156 Throughout these appendices, the terms Mortgage Alert, (October 12, 1998); ‘‘Capital advantage. See ‘‘No Credit Crunch for First ‘‘home loan’’ or ‘‘home mortgage’’ will refer America Halts Lending Amid Woes,’’ Mortgages,’’ Commercial Mortgage Alert, to a ‘‘home purchase loan,’’ as opposed to a Commercial Mortgage Alert, (October 12, (October 12, 1998); and ‘‘Turmoil a Bonanza ‘‘refinance loan.’’ 1998). for Freddie,’’ Commercial Mortgage Alert, 157 Subsections b–d of this section focus on 129 On CMBS spreads see ‘‘Turmoil Hikes (November 2, 1998). the single-family mortgage market for home Loan Rates’’ in Wall Street Mortgage Report, 144 Federal Reserve Bulletin, June 2000, A purchase loans, which is the relevant market (September 14, 1998). Regarding implications 35. for analysis of homeownership opportunities. for the GSEs of the conduit pullback see ‘‘No 145 See Table A.7a for details. It is assumed Subsection e extends the analysis to include Credit Crunch for First Mortgages’’ in that units in small multifamily properties single-family refinance loans. For a Commercial Mortgage Alert, (October 12, represented approximately 39.4 percent of discussion of past performance in the 1998). multifamily units financed in 1997, per the multifamily mortgage market, see Section D 130 ‘‘Financing Multifamily Properties: A 1991 Residential Finance Survey, as of this Appendix. Play With New Actors and New Lines,’’ discussed above. Additionally, it is assumed 158 Thus, the market definition in this Donald S. Bradley, Frank E. Nothaft, and that 1997 multifamily conventional section is narrower than the data presented James L. Freund, Cityscape: A Journal of origination volume was $38 billion, as earlier in Section C and Tables A.1a and Policy Development and Research, 4(1), discussed in Appendix D. An average loan A.1b, which covered all loans (both (1998). amount per unit of $27,266 is used, the GSE government and conventional) less than or 131 The Impact of Public Capital Markets average for 1997 acquisitions. equal to the conforming loan limit. As in that on Urban Real Estate, Clement Dinsmore, 146 Larger properties may be perceived as section, only the GSEs’ purchases of discussion paper, Brookings Institution less subject to income volatility caused by conventional conforming loans are Center on Urban and Metropolitan Policy, vacancy losses. Scale economies in considered; their purchases of FHA-insured, July 1998; ‘‘Capital Availability Fuels securitization may also favor purchase of VA-guaranteed, and Rural Housing Service Commercial Market Growth,’’ Marshall larger multifamily mortgages by the GSEs. loans are excluded from this analysis. Taylor, Real Estate Finance Today, (February Scale economies refer to the fixed costs in 159 Higher limits apply for loans on 2-, 17, 1997). creating a mortgage backed security, and the 3-, and 4-unit properties and for properties in 132 Board of Governors of the Federal smaller reduction in yield (higher security Alaska, Hawaii, Guam, and the Virgin Reserve System and U.S. Securities and price) if these costs can be spread over larger Islands. Exchange Commission, Report to the unpaid principal balances. 160 ‘‘Jumbo mortgages’’ in any given year Congress on Markets for Small-Business-and 147 1995 POMS data are used because 1995 might become eligible for purchase by the Commercial-Mortgage-Backed Securities, represents the year with the most complete GSEs in later years as the loan limits rise and (September 1998). mortgage origination information in the the outstanding principal balance is reduced. 133 ‘‘REITs Tally Nearly Half of All Big CRE Survey. 1996 GSE data are used because of 161 However, in analyzing the provision of Deals in First Quarter,’’ National Mortgage number of units of property exhibited mortgage finance more generally, it is often News, (July 7, 1997); ‘‘Will REITs, Mortgage- atypical behavior during 1995. appropriate to include government loans; see Backeds Make Difference in Downturn,’’ 148 These costs have been estimated at Tables A.1a, A.1b and A.2 in Section C.3.b. Jennifer Goldblatt, American Banker, $30,000 for a typical transaction. 162 Fair Lending/CRA Compass, (June (February 18, 1998). Presentation by Jeff Stern, Vice President, 1999), p. 3. 134 ‘‘Apartment Demographics: Good for Enterprise Mortgage Investments, HUD GSE 163 Randall M. Scheessele developed a list the Long Haul?’’ Jack Goodman, Real Estate Working Group, (July 23, 1998). of 42 subprime lenders that was used by
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HUD and others in analyzing HMDA data loans, the pattern for 1999 was similar to that those shown in Table A.5. For example, at through 1997. In 1998, Scheessele updated for 1993 to 1996 when there were smaller the 95 percent cutoff, Fannie Mae lagged the the list to 200 subprime lenders. For analysis differentials between the goals-qualifying market in 286 MSAs (88 percent) in the comparing various lists of subprime lenders, percentages of prior-year and current-year purchase of 1996 originated Special see Appendix D of Scheessele (1999), op. cit. mortgages. Affordable category loans. Likewise, Freddie That paper also discusses Scheessele’s lists of 171 Referencing the study by Peter Zorn and Mac lagged the market in 322 MSAs (99 manufactured housing lenders. Jim Berkovec, op cit., the GSEs argued in percent). 164 See Randall M. Scheessele, HMDA their comments on the proposed rule that 180 Privatization of Fannie Mae and Coverage of the Mortgage Market, Housing HMDA overstates goals-qualifying loans. See Freddie Mac: Desirability and Feasibility. Finance Working Paper HF–007, Office of Section A.3d for HUD’s response which Office of Policy Development and Research, Policy Development and Research, questions the findings of the Zorn-Berkovec Department of Housing and Urban Department of Housing and Urban study. Development, (July 1996). Development, July 1998. Scheessele reports 172 The borrower income distributions in 181 The Treasury Department reached that HMDA data covered 81.6 percent of the Tables A.3 and A.4a for the ‘‘market without similar conclusions in its 1996 report on the loans acquired by Fannie Mae and Freddie manufactured housing’’ exclude loans less privatization of the GSEs, Government Mac in 1996. The main reason for the under- than $15,000 as well as all loans originated Sponsorship of the Federal National reporting of GSE acquisitions is a few large by lenders that primarily originate Mortgage Association and the Federal Home lenders failed to report the sale of a manufactured housing loans. See Table A.4b Loan Mortgage Corporation, U.S. Department significant portion of their loan originations for market definitions that show the separate of the Treasury (July 11, 1996). Based on data to the GSEs. Also see the analysis of HMDA effects of excluding small loans and such as the above, the Treasury Department coverage by Jim Berkovec and Peter Zorn. manufactured housing loans. Also, Table questioned whether the GSEs were ‘‘Measuring the Market: Easier Said than A.4b shows that excluding subprime loans influencing the availability of affordable Done,’’ Secondary Mortgage Markets. has only a minor effect on the goals- mortgages and suggested that the lower- McLean VA: Freddie Mac (Winter 1996), pp. qualifying percentages in the mortgage income loans purchased by the GSEs would 18–21. Section A.4 of this appendix also market. have been funded by private market entities discusses several issues regarding HMDA 173 See Scheessele (1999), op. cit. As if the GSEs had not purchased them. data that were raised by the GSEs in their explained in Appendix D of Scheessele’s 182 See Glenn B. Canner, and Wayne comments on the proposed rule. paper, the number of subprime lenders varies Passmore. ‘‘Credit Risk and the Provision of 165 Since 1993, the GSEs have increased by year; the 200 figure cited in the text Mortgages to Lower-Income and Minority their purchases of seasoned loans. See Paul applies to 1998. The number of loans Homebuyers,’’ Federal Reserve Bulletin. 81 B. Manchester, Characteristics of Mortgages identified as subprime in these appendices is (November 1995), pp. 989–1016; Glenn B. Purchased by Fannie Mae and Freddie Mac: the same as reported by Scheessele in Table Canner, Wayne Passmore and Brian J. 1996–1997 Update, Housing Finance D.2b of his paper. Surette. ‘‘Distribution of Credit Risk among Working Paper HF–006, Office of Policy 174 Table A.1b in Section C.3.b provides Providers of Mortgages to Lower-Income and Development and Research, Department of several comparisons of the GSEs’ total Minority Homebuyers.’’ Federal Reserve Housing and Urban Development, (August purchases with primary market originations. Bulletin. 82 (December 1996), pp. 1077–1102; 1998), p.17. As shown there, many of the same patterns Harold L. Bunce, and Randall M. Scheessele, 166 For a discussion of the impact of the described above for home purchase loans can The GSEs’ Funding of Affordable Loans: A GSEs’ seasoned mortgage purchases on be seen in the data for the GSEs’ total 1996 Update, Housing Finance Working HMDA data coverage, see Scheessele (1998), purchases. Paper HF–005, Office of Policy Development op. cit. 175 In general, the HMDA-reported and Research, Department of Housing and 167 Table A.4b, which reports similar GSE affordability percentages for GSE purchases Urban Development, (July 1998); and information as Table A.4a, provides several of refinance loans have matched the Manchester, (1998), p. 24. alternative estimates of the conventional corresponding GSE-reported percentages. For 183 Canner, et al. (1996). conforming market depending on the example, in 1997, both GSEs reported to 184 Harold L. Bunce and Randall M. treatment of small loans, manufactured HUD that special affordable loans accounted Scheessele, The GSEs’ Funding of Affordable housing loans, and subprime loans. The data for about 11 percent of their purchases of Loans, Housing Finance Working Paper HF– in Table A.4b will be referenced throughout refinance loans in metropolitan areas; HMDA 001, Office of Policy Development and the discussion. reported the same percentage for each GSE. Research, U.S. Department of Housing and 168 Any HMDA data reported in the Similarly, in 1998, both HMDA and Fannie Urban Development, (December 1996). appendices on borrower incomes excludes Mae reported that special affordable loans 185 Harold L. Bunce and Randall M. loans where the loan-to-borrower-income accounted for 9.7 percent of Fannie Mae’s Scheessele, The GSEs’ Funding of Affordable ratio is greater than six. refinance purchases. However, in 1998, the Loans: A 1996 Update, Housing Finance 169 For example, in 1997 Fannie Mae Freddie-Mac-reported special affordable Working Paper HF–005, Office of Policy reported that 20.8 percent of the loans they percentage (10.7 percent) for its refinance Development and Research, U.S. Department purchased, that were originated during 1997, loans was significantly higher than the of Housing and Urban Development, (July were for properties in underserved areas. corresponding percentage (9.5 percent) 1998), pp. 15–16. HMDA reports that 21.0 percent of the loans reported in the HMDA data. The reasons for 186 Statistics cited are from Table B.1 of sold to Fannie Mae during 1997 were for this discrepancy require further study. Bunce and Scheessele, (1998) and are based properties in underserved areas. The 176 The Mortgage Information Corporation on sales to the GSEs as reported by lenders corresponding numbers for Freddie Mac, in (MIC) has recently started publishing in accordance with the HMDA. ‘‘Lagging the 1997, are 19.3 percent reported by them and origination and default performance data for market’’ means, for example, that the 18.6 percent reported by HMDA. During the subprime market. For an explanation of percentage of the GSEs’ loans for very low- 1997, both Fannie Mae and HMDA reported their data and some early findings, see Dan and low-income borrowers is less than the that approximately 37 percent of the ‘‘current Feshbach and Michael Simpson, ‘‘Tools for corresponding percentage for the primary year’’ loans purchased by Fannie Mae were Boosting Portfolio Performance’’, Mortgage market, depositories, and the FHA. for low- and moderate-income borrowers. Banking: The Magazine of Real Estate 187 Under their charter acts, loans Freddie Mac reported that 34.2 percent of the Finance, (October 1999), pp. 137–150. purchased by the GSEs with down payments current year loans they purchased were for 177 For example, see Bunce and Scheessele of less than 20 percent must carry private low-mod borrowers, compared to the 35.4 (1996 and 1998), op. cit. mortgage insurance or a comparable form of low-mod percent that HMDA reported as sold 178 This analysis is limited to the credit enhancement. to Freddie Mac. conventional conforming market. 188 It is generally agreed that HMDA does 170 Notice that while Fannie Mae’s 1998 179 To test the robustness of these statistics, not capture all loans originated in the purchases resembled their 1997 purchases this analysis was conducted where the ‘‘lag’’ primary market—for example, small lenders with prior-year loans having higher goals- determination is made at 95 percent instead need not report under HMDA. But Fannie qualifying percentages than current-year of 99 percent. The results are consistent with Mae believes that the undercount is not
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Office of Policy Development and Research, families. 200 The coefficient for the highest minority- Department of Housing and Urban 189 Bunce and Scheessele (1998) contained concentration category (census tracts with Development (2000). a comparison (Table A.1) of HMDA-reported greater than 50% minority population) was 206 Kenneth Temkin, Roberto Quercia, and GSE-reported data on the characteristics significantly negative in 21 MSAs, but George Galster and Sheila O’Leary. A Study of GSE mortgage purchases in 1996. In most significantly positive in 10 MSAs and not of the GSEs’ Single Family Underwriting cases the differences between the results significantly different from zero in the Guidelines: Final Report. Washington DC: utilizing the two different data sources were remaining 13. U.S. Department of Housing and Urban minimal, but in some cases (such as lending 201 Samuel L. Myers, Jr. The Effects of Development, (April 1999). in underserved areas) the evidence lent some Government-Sponsored Enterprise Secondary 207 In following up on the Urban Institute support to Fannie Mae’s assertion that the Market Decisions on Racial Disparities in study, HUD began in February 2000 a review HMDA data underreports their level of Loan Rejection Rates. Research Study of Fannie Mae’s and Freddie Mac’s activity. The discrepancies between HMDA submitted to the Office of Policy automated underwriting systems. data and GSE data at the national level are Development and Research, Department of 208 Standard guidelines refer to guidelines also due to the seasoned loan effect (see Housing and Urban Development, (1999). not associated with affordable lending Section E.2.e above and Table A.4a). 202 Variables from the GSE Public Use Data programs. 190 John E. Lind. Community Reinvestment Base include the income and gender of the 209 Temkin, et al. (1999), p. 4. and Equal Credit Opportunity Performance of borrower, the gender and race of the 210 Temkin, et al. (1999), p. 5. Fannie Mae and Freddie Mac from the 1994 coborrower, first-time homebuyer, and loan 211 Temkin, et al. (1999), p. 28. HMDA Data. San Francisco: Caniccor. amount. Variables from Census 1990 include 212 Senate Report 102–282, (May 15, 1992), Report, (February 1996). the following information for the census tract p. 35. 191 John E. Lind. A Comparison of the in which the property is located: percent of 213 Table A.7a(A.7b) considers GSE Community Reinvestment and Equal Credit owner-occupied houses, average size of purchases during 1997, 1998, and 1999 (1998 Opportunity Performance of Fannie Mae and household, average number of persons per and 1999) of conventional mortgages that Freddie Mac Portfolios by Supplier from the owner-occupied house, average number of were originated during 1997 (1998). HUD’s 1994 HMDA Data. San Francisco: Cannicor. persons per renter-occupied unit, percentage methodology for deriving the market Report, (April 1996). of white, black, Asian, American Indian, and estimates is explained in Appendix D. B&C 192 Brent W. Ambrose and Anthony other minority households, average poverty loans have been excluded from the market Pennington-Cross, Spatial Variation in rate, median monthly rent, median house estimates in Table A.7. Lender Market Shares, Research Study value, percent of persons 65 or older, percent 214 Two caveats about the data in Table A.7 submitted to the Office of Policy of persons under 18, and percent of female- should be mentioned here. First, the various Development and Research, Department of headed households. Variables from HMDA market totals for underserved areas are Housing and Urban Development, (1999). include reason for denial, whether or not probably understated due to the model’s 193 Heather MacDonald. ‘‘Expanding loan is sold to GSE, type of loan underestimation of mortgage activity in non- Access to the Secondary Mortgage Markets: (conventional), type of agency, and metropolitan underserved counties and of The Role of Central City Lending Goals,’’ origination year. manufactured housing originations in non- Growth and Change. (27), (1998), pp. 298– 203 The unconditional probability that a metropolitan areas. Second, as discussed in 312. loan will not be sold, P(NS), to a GSE is Appendix D, some uncertainty exists around 194 Heather MacDonald, Fannie Mae and computed using Bayes’ rule. It is based on the adjustment for B&C single-family owner Freddie Mac in Non-metropolitan Housing the conditional probability that a loan is sold loans. Markets: Does Space Matter, Research Study to GSEs given that it was originated, P(SO), 215 Table A.7a shows that multifamily submitted to the Office of Policy and the probability that a loan is originated represented 19 percent of total units financed Development and Research, Department of which are obtained using HMDA data. The during 1997 (obtained by dividing 1,393,677 Housing and Urban Development, (1999). unconditional probability that a loan will be multifamily units by 7,306,950 ‘‘Total 195 Kirk McClure, The Twin Mandates sold to a GSE can not be obtained from either Market’’ units). Increasing the single-family- Given to the GSEs: Which Works Best, the HMDA data which does not include owner number in Table A.7 by 732,182 to Helping Low-Income Homebuyers or Helping details of which loans were sent for review account for excluded B&C mortgages Underserved Areas in the Kansas City and which were declined by the secondary increases the ‘‘Total Market’’ number to Metropolitan Area? Research Study purchaser—or from the HUD-GSE data, 8,039,132 which is consistent with the submitted to the Office of Policy which only includes approved loans. percent multifamily share reported in the Development and Research, Department of However, we know from Bayes’ rule that text. See Appendix D for discussion of the Housing and Urban Development, (1999). B&C market. 196 P (S) P (O ¦ S) 216 Richard Williams, The Effect of GSEs, P (S¦O)= A similar imbalance is evident with CRA, and Institutional Characteristics on P (O) regard to figures on the stock of mortgage Home Mortgage Lending to Underserved debt published by the Federal Reserve Board. Markets,’’ Research Study submitted to the where S mean that the loan was sold and Within the single-family mortgage market the Office of Policy Development and Research, O means that the loan was originated and GSEs held loans or guarantees with an Department of Housing and Urban where all loan sold by the lender must have unpaid principal balance (UPB) of $1.5 Development, (1999). been originated such that P(OS)=1. We can trillion, comprising 36 percent of $4.0 trillion 197 Joseph Gyourko and Dapeng Hu. The obtain a measure of the unconditional in outstanding single-family mortgage debt as Spatial Distribution of Secondary Market probability that a loan will not be sold from of the end of 1997. At the end of 1997, the Purchases in Support of Affordable Lending, −− GSEs direct holdings and guarantees of $41.4 Research Study submitted to the Office of P (NS) = 1 P (S) = 1 P (S¦ O) P (O). billion represented 13.7 percent of $301 Policy Development and Research, 204 Calvin Bradford, The Patterns of GSE billion in multifamily mortgage debt Department of Housing and Urban Participation in Minority and Racially outstanding. (Federal Reserve Bulletin, June Development, (1999). Changing Markets Reviewed from the Context 1998, A 35.) 198 Bradford Case and Kevin Gillen. Studies of the Levels of distress Associated with High 217 The problem of secondary market of Mortgage Purchases by Fannie Mae and Levels of FHA Lending, Research Study ‘‘adverse selection’’ is described in James R. Freddie Mac: Spatial Variation in GSE submitted to the Office of Policy Follain and Edward J. Szymanoski. ‘‘A Mortgage Purchase Activity. Research Study Development and Research, Department of Framework for Evaluating Government’s submitted to the Office of Policy Housing and Urban Development (2000). Evolving Role in Multifamily Mortgage Development and Research, Department of 205 David M. Harrison, Wayne R. Archer, Markets,’’ Cityscape: A Journal of Policy Housing and Urban Development, (1999). David C. Ling, and Marc T. Smith, Mitigating Development and Research 1(2), (1995).
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218 A jumbo mortgage is one for which the (FHEFSSA) requires the Secretary to excluded tracts. The tracts include 73 percent loan amount exceeds the maximum principal establish an annual goal for the purchase of of the number of poor persons in amount for mortgages purchased by the mortgages on housing located in central metropolitan areas. enterprises—$240,000 for mortgages on 1- cities, rural areas, and other underserved This definition is based on studies of unit properties in 1999, with limits that are areas (the ‘‘Geographically Targeted Goal’’). mortgage lending and mortgage credit flows 50 percent higher in Alaska, Hawaii, Guam, In establishing this annual housing goal, conducted by academic researchers, and the Virgin Islands. Section 1334 of FHEFSSA requires the community groups, the GSEs, HUD and other 219 Office of Federal Housing Enterprise Secretary to consider: government agencies. While more research Oversight, 1998 Report to Congress, (June 15, 1. Urban and rural housing needs and the must be done before mortgage access for 1998), Figure 9, p. 32; and unpublished housing needs of underserved areas; different types of people and neighborhoods OFHEO estimates for 1998. 2. Economic, housing, and demographic is fully understood, one finding from the 220 Mortgage originations for 1997 were conditions; existing research literature stands out—high- reported in the Department of Housing and 3. The performance and effort of the minority and low-income neighborhoods Urban Development, HUD Survey of enterprises toward achieving the continue to have higher mortgage denial rates Mortgage Lending Activity: Fourth Quarter/ Geographically Targeted Goal in previous and lower mortgage origination rates than Annual 1997, (September 24, 1998). years; other neighborhoods. A neighborhood’s 221 The underwriting guidelines published 4. The size of the conventional mortgage minority composition and its level of income by the two GSEs are similar in most aspects. market for central cities, rural areas, and are highly correlated with measuring access And since November 30, 1992, Fannie Mae other underserved areas relative to the size of to mortgage credit. and Freddie Mac have provided lenders the the overall conventional mortgage market; Nonmetropolitan Areas. This rule provides same Uniform Underwriting and Transmittal 5. The ability of the enterprises to lead the that in nonmetropolitan areas mortgage Summary (Fannie Mae Form 1008/Freddie industry in making mortgage credit available purchases that finance properties that are Mac Form 1077), which is used by throughout the United States, including located in counties will count toward the originators to collect certain mortgage central cities, rural areas, and other Geographically Targeted Goal where (1) information that they need for data entry underserved areas; and median income of families in the county does when mortgages are sold to either GSE. 6. The need to maintain the sound not exceed 95 percent of the greater of (a) 222 Freddie Mac stock was not publicly financial condition of the enterprises. state nonmetropolitan median income or (b) traded until after the passage of the Financial Organization of Appendix. The remainder nationwide nonmetropolitan median income, Institutions Reform, Recovery and of Section A first defines the Geographically or (2) minorities comprise 30 percent or more Enforcement Act of 1989 (FIRREA), thus it is Targeted Goal for both metropolitan areas of the residents and median income of not possible to calculate a 10-year annualized and nonmetropolitan areas and then families in the county does not exceed 120 rate of return. discusses HUD’s response to the public percent of the greater of (a) state 223 Fortune, (April 17, 2000), pp. F–1, F–2. comments raised in this appendix. Sections nonmetropolitan median income or (b) 224 Business Week, (March 27, 2000), p. B and C address the first two factors listed nationwide nonmetropolitan median income. 197. above, focusing on findings from the The nonmetropolitan definition has been 225 U.S. Department of Housing and Urban literature on access to mortgage credit in expanded slightly by adding criterion (b) Development. Rental Housing Assistance— metropolitan areas (Section B) and in under part (2) of this definition—as a result, The Worsening Crisis: A Report to Congress nonmetropolitan areas (Section C). Separate 14 counties in Texas, Mississippi, Arizona, on Worst Case Housing Needs. (March 2000). discussions are provided for metropolitan Arkansas, Georgia, and Louisiana that were 226 Standard & Poor’s DRI, The U.S. and nonmetropolitan (rural) areas because of previously classified as served areas have Economy. (June 2000), p. 56. differences in the underlying markets and the now been reclassified as underserved 227 See Drew Schneider and James Follain, data available to measure them. Section D counties. ‘‘A New Initiative in the Federal Housing discusses the past performance of the GSEs Two important factors influenced HUD’s Administration’s Office of Multifamily on the Geographically Targeted Goal (the definition of nonmetropolitan underserved Housing Programs: An Assessment of Small third factor) and Sections E–G report the areas—lack of available data for measuring Projects Processing,’’ Cityscape: A Journal of Secretary’s findings for the remaining factors. mortgage availability in rural areas and Policy Development and Research 4(1), Section H summarizes the Secretary’s lenders’ difficulty in operating mortgage (1998), pp. 43–58. 228 rationale for setting the level for the programs at the census tract level in rural Senate Report 102–282, (May 15, 1992), Geographically Targeted Goal. areas. Because of these factors, this rule uses p. 36. a more inclusive, county-based definition of 229 2. HUD’s Geographically Targeted Goal ‘‘Final Report of Standard & Poor’s to underservedness in rural areas. HUD’s the Office of Federal Housing Enterprise HUD’s definition of the geographic areas definition includes 1,511 of the 2,305 Oversight (OFHEO),’’ (February 3, 1997), p. targeted by this goal is basically the same as counties (66 percent) in nonmetropolitan 10. that used during 1996–99. It is divided into areas and accounts for 54 percent of the 230 However, the Department’s goals for the a metropolitan component and a nonmetropolitan population and 67 percent GSEs have been set so that they will be nonmetropolitan component. of the nonmetropolitan poverty population. feasible even under less favorable conditions Metropolitan Areas. This rule provides that Goal Levels. The Geographically Targeted in the housing market. within metropolitan areas, mortgage Goal is 31 percent of eligible units financed 231 Another area where stepped-up GSE purchases will count toward the goal when for calendar years 2001–03. HUD estimates involvement could benefit low- and those mortgages finance properties that are moderate-income families is lending for the that the mortgage market in areas included in located in census tracts where (1) median rehabilitation of properties, which is the Geographically Targeted Goal accounts income of families in the tract does not especially needed in our urban areas. The for 29–32 percent of the total number of exceed 90 percent of area (MSA) median GSEs have made some efforts in this complex newly-mortgaged dwelling units. HUD’s income or (2) minorities comprise 30 percent area, but the benefits of stepped-up roles by analysis indicates that 27.0 percent of Fannie or more of the residents and median income the GSE could be sizable. Mae’s 1998 purchases and 26.8 percent of its of families in the tract does not exceed 120 1999 purchases financed dwelling units Appendix B—Departmental percent of area median income. located in these areas. The corresponding Considerations to Establish the Central The definition includes 20,326 of the performance for Freddie Mac was 26.1 Cities, Rural Areas, and Other 43,232 census tracts (47 percent) in percent in 1998 and 27.5 percent in 1999. metropolitan areas, which include 44 percent Underserved Areas Goal of the metropolitan population.1 The tracts 3. Response to Comments A. Introduction and Response to Comments included in this definition suffer from poor This section briefly reviews the main mortgage access and distressed comments on the analyses reported in this 1. Establishment of Goal socioeconomic conditions. The average appendix. First, both GSEs, but particularly The Federal Housing Enterprises Financial mortgage denial rate in these tracts is 19.4 Freddie Mac, were concerned that the Safety and Soundness Act of 1992 percent, almost twice the denial rate in Underserved Areas Goal was set too high.
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Second, HUD received varying responses on share of the owner market could fall from its Comments against the enhanced definition changing the underserved areas definition to 1995–98 average of 33 percent to 24 percent fell into two categories: some commenters adopt an ‘‘enhanced’’ definition that would before the overall market estimate would fall did not support decreasing the number of lower the income threshold for the census to 30 percent, and to below 22 percent before census tracts that qualify as underserved tract definition to 80 percent and raise the the overall market estimate would fall below areas, while others did not support using the minority threshold to 50 percent. Finally, 29 percent. As mentioned in HUD’s response greater of local or national median income in HUD received a range of comments on to the ‘‘volatility’’ issue (see Section B of computing the tract income ratio. switching the non-metropolitan underserved Appendix D), the Secretary can re-examine No general support from the GSEs or other areas definition from a county-based to a the feasibility of the housing goals if a commenters was found for increasing the tract-based approach. With respect to the recession or other economic conditions cause minimum minority composition of latter two issues, HUD has decided to wait a substantial decline in the mortgage market underserved census tracts from 30 percent to until year 2000 Census data are available, in underserved areas. 50 percent. One commenter indicated that which will allow for an up-to-date Third, HUD excluded the B&C portion of this change would disproportionately impact comprehensive analysis of these issues. the subprime market when determining its the Hispanic population, though no data was a. The Level of the Underserved Areas Goal market range (29–32 percent) for underserved presented to support this claim. areas. As explained in Section G of Appendix HUD’s Response. HUD is not changing the Fannie Mae supported the increase in D, the estimated increase in the market share definition of underserved metropolitan areas affordable housing goals, which includes due to the county-based definition in non- in this final rule, but the Department reserves raising the underserved areas goal from its metropolitan areas more than offsets the the right to reexamine this definition current level of 24 percent to 31 percent. estimated reduction in market share due to following the release of the 2000 Census data. Freddie Mac stated that ‘‘the Underserved the exclusion of B&C loans. (This offsetting The Department acknowledges that the 2000 Areas Goal proposed by the Department is pattern can be seen in Table D.15 of Census will impact the designation of census unreasonably high’’ and recommended that Appendix D for the years 1995–98.) But due tracts that are currently targeted as the goal level be reduced from 31 percent to to inadequate mortgage market data for non- underserved areas. Many changes have 30 percent. Freddie Mac stated further that metropolitan areas, HUD was unable to fully occurred in the last decade that impact the ‘‘setting the Underserved Areas Goal at 31 include the effects of underserved counties in various factors which make up the percent for those three years [2001–03] its market range for the Underserved Areas underserved areas definition. Any changes in amounts to a significantly larger stretch than Goal. Thus, the 29–32 percent range is a the underserved area definition based on the for the other two goals and makes it conservative market estimate. HUD continues 1990 Census data would not provide a significantly less feasible under a variety of to explore other data bases to improve its complete assessment of outcomes. economic conditions’’. Freddie Mac based its estimates of the mortgage market in rural conclusion on a number of factors, such as c. Changes to the Underserved Areas underserved counties. Definition for Non-metropolitan Areas the fact that this goal is set closer to the Finally, it should be noted that the rental upper end of HUD’s market range (29–32 sectors that the GSEs have traditionally Fannie Mae and Freddie Mac agreed that percent), as compared with the Low-Mod and experienced the most difficulty penetrating the current county-based definition for non- Special Affordable Goals; Freddie Mac are less important for the Underserved Areas metropolitan areas should be retained. Both concluded that consistency with the other Goal than for the Low-Mod and Special GSEs believe, as also indicated in their two goals would call for a 30 percent Affordable Goals. The latter two goals rely comments on the 1995 rule, that rural Underserved Areas Goal. In addition, Freddie more heavily on the GSEs’ single-family lenders’ business is centered around Mac stated that HUD’s market range is rental and multifamily purchases than the counties, rather than census tracts. They cite overestimated and does not fully account for Underserved Areas Goal. For example, the lack of data for rural areas as sufficient adverse economic changes. According to special affordable loans amounted to one half cause to maintain the status quo, since the Freddie Mac, HUD’s overestimation of the of the rental units financed by the GSEs information void makes it difficult to judge underserved areas market is due to HUD’s during 1998, versus only 10.6 percent of the the impact of any change in the definition. overestimation of the rental property share of owner units, yielding a rental-to-owner ratio Some commenters agreed with the GSEs, the mortgage market; to a bias in HMDA data of 4.7. On the other hand, units in while others did not. One set of commenters that leads to the underserved areas portion of underserved areas amounted to 43.1 percent including America’s Community Bankers and the owner market being overstated; and to of the rental units financed, versus 23.4 the Independent Community Bankers of HUD’s underestimation of the subprime percent of the owner units, yielding a much America agreed with the GSEs regarding portion of the single-family market. lower rental-to-owner ratio of 1.8. retention of the county-based definition. The HUD’s Response. HUD does not agree with Housing Assistance Council supported Freddie Mac’s recommendation that the b. Changes in the Underserved Areas changing the underserved areas definition to Underserved Areas Goal should be lowered Definition for Metropolitan Areas a more targeted, census tract-based below the proposed level. Several factors Neither Fannie Mae nor Freddie Mac definition. must be considered when evaluating Freddie supported changing the underserved areas Other recommendations for defining rural Mac’s analysis and recommendations. First, definition in metropolitan areas. With regard underserved areas were received. The HUD disagrees with Freddie Mac’s to the enhanced option, the GSEs advocated Wisconsin Rural Development Center and the conclusion that the Department’s against reducing the number of census tracts Fair Lending Coalition of Milwaukee methodology overstates the rental portion of that qualified for goal based on 1990 Census proposed looking at the minimum income the market. HUD’s analysis of this issue is data, since these tracts might qualify under ratio based on county, tract, or block group. discussed in Sections B and C of Appendix the updated 2000 Census data. Both GSEs A few commenters proposed using poverty D. By relying on HMDA data, Freddie Mac believe that HUD should not change the levels as a criteria for targeting underserved (as well as the Freddie Mac-funded study by current definition until the updated counties. PriceWaterhouseCoopers) significantly information for demographics and housing HUD’s Response. HUD recognizes the underestimates the multifamily share of the stock composition of census tracts is broad nature of the current definition of rural mortgage market, which leads to its available from the 2000 census data. underserved areas. As explained in the erroneous conclusions about the size of the In addition to the GSEs’ views, a number proposed rule, one shortcoming of this goal underserved areas market. of comments both supporting and opposing in non metropolitan counties is that it does Second, HUD has set its range of market the enhanced definition were received. not target the GSEs’ purchases very well—for estimates for this goal at a rather conservative Advocates for the enhanced definition example, the GSEs’ mortgage purchases in level. As discussed in Section G of Appendix supported changing the tract income ratio rural underserved areas have a higher share D, the underserved areas portion of the from 90 percent to 80 percent to coincide of borrowers with income above county market (without B&C loans) averaged 33 with the definition under the Community median income than their purchases in urban percent between 1995 and 1998—somewhat Reinvestment Act (CRA). This change would underserved areas. However, due to the lack higher than the top end of HUD’s 29–32 make the GSEs’ housing goals and CRA of data on mortgage originations in non- percent market range. As shown in Table mutually supportive and would use a metropolitan areas, it is difficult to precisely D.19 of Appendix D, the underserved areas standard already employed by banks. identify rural underserved areas. The
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Department acknowledges that the 2000 characteristics of the mortgage applicant and offered less financing assistance, or provided Census will impact the designation of the neighborhood in which the applicant less information than similarly situated non- counties that are currently targeted as wishes to buy. In addition, though racial minority homeseekers. Some evidence underserved. Before changing the definition discrimination has become less blatant in the indicates that properties in minority and for underserved non-metropolitan areas, it home purchase market, studies have shown racially-diverse neighborhoods are marketed would be prudent to wait for new data on that it is still widespread in more subtle differently from those in White area demographics. HUD will re-examine this forms. Partly as a result of these factors, the neighborhoods. Houses for sale in non-White issue when data from the 2000 Census are homeownership rate for minorities is neighborhoods are rarely advertised in available. substantially below that of whites. metropolitan newspapers, open houses are Appendix A provided an overview of the rarely held, and listing real estate agents are B. Consideration of Factors 1 and 2 in homeownership gaps and lending disparities Metropolitan Areas: The Housing Needs of faced by minorities. A quick look at mortgage less often associated with a multiple listing 6 Underserved Urban Areas and Housing, denial rates reported by the 1998 HMDA data service. Economic, and Demographic Conditions in reveals that minority denial rates were higher Discrimination, while not the only cause, Underserved Urban Areas than those for white loan applicants. For contributes to the pervasive level of This section discusses differential access to lower-income borrowers, the conventional segregation that persists between African mortgage funding in urban areas and denial rate for African Americans was 1.9 Americans and Whites in our urban areas. summarizes available evidence on times the denial rate for white borrowers, Because minorities tend to live in segregated identifying those neighborhoods that have while for higher-income borrowers, the neighborhoods, their difficulty in obtaining historically experienced problems gaining denial rate for African Americans was 2.5 mortgage credit has a concentrated effect on access to mortgage funding. Section B.1 times the rate for white borrowers. Similarly, the viability of their neighborhoods. In provides an overview of the problem of the FHA denial rate for lower-income African addition, there is evidence that denial rates unequal access to mortgage funding in the Americans was 1.7 times the denial rates for are higher in minority neighborhoods nation’s housing finance system, focusing on lower-income white borrowers and twice as regardless of the race of the applicant. The discrimination and other housing problems high for higher-income African Americans as next section explores the issue of credit faced by minority families and the for whites with similar incomes. availability in neighborhoods in more detail. communities where they live. Section B.2 Several analytical studies, some of which examines mortgage access at the are reviewed later in this section, show that 2. Evidence About Access to Credit in Urban neighborhood level and discusses in some these differentials in denial rates are not fully Neighborhoods detail the rationale for the Geographically accounted for by differences in credit risk. The viability of neighborhoods—whether Targeted Goal in metropolitan areas. The Perhaps the most publicized example is a urban, rural, or suburban—depends on the most thorough studies available provide study by the Federal Reserve Bank of Boston, access of their residents to mortgage capital strong evidence that in metropolitan areas described in more detail below, which found to purchase and improve their homes. While that differential denial rates were most low income and high minority census tracts neighborhood problems are caused by a wide prevalent among marginal applicants.3 are underserved by the mortgage market. range of factors, including substantial Highly qualified borrowers of all races Three main points are made in this section: inequalities in the distribution of the nation’s • There is evidence of racial disparities in seemed to be treated equally, but in cases income and wealth, there is increasing both the housing and mortgage markets. where there was some flaw in the agreement that imperfections in the nation’s Partly as a result of this, the homeownership application, white applicants seemed to be housing and mortgage markets are hastening rate for minorities is substantially below that given the benefit of the doubt more for whites. frequently than minority applicants. the decline of distressed neighborhoods. • The existence of substantial The Urban Institute conducted a case study Disparate denial of credit based on neighborhood disparities in mortgage credit of lenders’ origination processes.4 The geographic criteria can lead to disinvestment is well documented for metropolitan areas. research team and lenders believed and neighborhood decline. Discrimination Research has demonstrated that census tracts origination processes to be race-blind. A and other factors, such as inflexible and with lower incomes and higher shares of review of the HMDA data revealed that restrictive underwriting guidelines, limit minority population consistently have poorer origination outcomes were different for access to mortgage credit and leave potential access to mortgage credit, with higher whites, black, and Hispanics—where lenders borrowers in certain areas underserved. mortgage denial rates and lower origination denied a small proportion of minority Data on mortgage credit flows are far from rates for mortgages. Thus, the income and applicants, they denied an even smaller perfect, and issues regarding the minority composition of an area is a good proportion of white applications. This may identification of areas with inadequate access measure of whether that area is being result from the lender’s staff making greater to credit are both complex and controversial. underserved by the mortgage market. efforts to qualify marginal white applicants For this reason, it is essential to define • Research supports a targeted definition. compared with marginal black and Hispanic ‘‘underserved areas’’ as accurately as possible Studies conclude that characteristics of the applicants. from existing data. To provide the reasoning applicant and the neighborhood where the In addition to discrimination in the behind the Department’s definition of property is located are the major lending market, substantial evidence exists of underserved areas, this section first uses determinants of mortgage denials and discrimination in the housing market. The 1998 HMDA data to examine geographic 1991 Housing Discrimination Study origination rates. Once these characteristics variation in mortgage denial rates, and then sponsored by HUD found that minority home are accounted for, other influences, such as it reviews three sets of studies that support buyers encounter some form of location in an OMB-designated central city, HUD’s definition. These include (1) studies play only a minor role in explaining discrimination about half the time when they examining racial discrimination against disparities in mortgage lending.2 visit a rental or sales agent to ask about advertised housing.5 The incidence of individual mortgage applicants, (2) studies 1. Discrimination in the Mortgage and discrimination was higher for African that test whether mortgage redlining exists at Housing Markets—An Overview Americans than for Hispanics and for the neighborhood level, and (3) studies that The nation’s housing and mortgage markets homebuyers than for renters. For renters, the support HUD’s targeted approach to are highly efficient systems, where most incidence of discrimination was 46 percent measuring areas that are underserved by the homebuyers can put down relatively small for Hispanics and 53 percent for African mortgage market. In combination, these amounts of cash and obtain long-term Americans. The incidence among buyers was studies provide strong support for the funding at relatively small spreads above the 56 percent for Hispanics and 59 percent for definition of underserved areas chosen by lender’s borrowing costs. Unfortunately, this African Americans. HUD. The review of the economics literature highly efficient financing system does not While discrimination is rarely overt, draws from Appendix B of the 1995 GSE work everywhere or for everyone. Studies minorities are more often told the unit of Rule; readers are referred there for a more have shown that access to credit often interest is unavailable, shown fewer detailed treatment of earlier studies of the depends on improper evaluation of properties, offered less attractive terms, issues discussed below.
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Table B.2 illustrates the interaction family status and composition. Although redlining. However, as explained below, between tract minority composition and tract almost all highly-qualified applicants of all these studies cannot reach definitive income by aggregating the data in Table B.1 races were approved, differential treatment conclusions about redlining because into nine minority and income combinations. was observed among borrowers with more segregation in our inner cities makes it The low-minority (less than 30 percent marginal qualifications.9 difficult to distinguish the impacts of minority), high-income (over 120 percent of A subsequent reassessment and refinement geographic redlining from the effects of area median) group had a denial rate of 7.9 of the data used by the Federal Reserve Bank individual discrimination. percent and an origination rate of 19.6 loans of Boston confirmed the findings of that Additional studies related to redlining and per 100 owner occupants in 1998. The high- study.10 William C. Hunter of the Federal the credit problems facing low- income and minority (over 50 percent), low-income Reserve Bank of Chicago confirmed that race minority neighborhoods are also (under 90 percent of area median) group had was a factor in denial rates of marginal summarized. Particularly important are a denial rate of 24.0 percent and an applicants. While denial rates were studies that focus on the ‘‘thin’’ mortgage origination rate of only 8.5 loans per 100 comparable for borrowers of all races with markets in these neighborhoods and the owner occupants. The other groupings fall ‘‘good’’ credit ratings, among those with implications of lenders not having enough between these two extremes. ‘‘bad’’ credit ratings or high debt ratios, information about the collateral and other The advantages of HUD’s underserved area minorities were significantly more likely to characteristics of these neighborhoods. The definition can be seen by examining the be denied than similarly-situated whites. The low numbers of house sales and mortgages minority-income combinations highlighted in study concluded that the racial differences in originated in low-income and high-minority Table B.2. The sharp differences in denial denial rates were consistent with a cultural neighborhoods result in individual lenders rates and origination rates between the gap between white loan officers and minority perceiving these neighborhoods to be more underserved and remaining served categories applicants, and conversely, a cultural affinity risky. It is argued that lenders do not have illustrate that HUD’s definition delineates with white applicants. enough historical information to project the areas that have significantly less success in The two Fed studies concluded that the expected default performance of loans in receiving mortgage credit. In 1998 effect of borrower race on mortgage rejections low-income and high-minority underserved areas had almost twice the persists even after controlling for legitimate neighborhoods, which increases their average denial rate of served areas (19.4 determinants of lenders’ credit decisions. uncertainty about investing in these areas. percent versus 10.3 percent) and less than Thus, they imply that variations in mortgage Holmes and Horvitz Study. Andrew two-thirds the average origination rate per denial rates, such as those given in Table B.2, Holmes and Paul Horvitz used 1988–1991 100 owner occupants (10.8 versus 17.5). are not determined entirely by borrower risk, HMDA data to examine variations in HUD’s definition does not include high- but reflect discrimination in the housing conventional mortgage originations across income (over 120 percent of area median) finance system. However, the independent census tracts in Houston. Their single- census tracts even if they meet the minority race effect identified in these studies is still equation regression model included as threshold. The mortgage denial rate (13.3 difficult to interpret. In addition to lender explanatory variables the economic viability percent) for high-income tracts with a bias, access to credit can be limited by loan of the loan, characteristics of properties in minority share of population over 30 percent characteristics that reduce profitability 11 and and residents of the tract (e.g., house value, is much less than the denial rate (19.4 by underwriting standards that have income, age distribution and education percent) in underserved areas as defined by disparate effects on minority and lower- level), measures of demand (e.g., recent HUD, and only slightly above the average income borrowers and their neighborhoods.12 movers into the tract and change in owner- (10.3 percent) for all served areas. c. Controlling for Neighborhood Risk and occupied units between 1980 and 1990), and b. Federal Reserve Bank Studies Tests of the Redlining Hypothesis measures of credit risk (defaults on The analysis of denial rates in the above In its deliberations leading up to government-insured loans and change in section suggests that HUD’s definition is a FHEFSSA, Congress was concerned about tract house values between 1980 and 1990). good proxy for identifying areas experiencing geographic redlining—the refusal of lenders To test the existence of racial redlining, the credit problems. However, an important to make loans in certain neighborhoods model also included as explanatory variables question is the degree to which variations in regardless of the creditworthiness of the percentages of African American and denial rates reflect lender bias against certain individual applicants. During the 1980’s and Hispanic residents in the tract and the kinds of neighborhoods and borrowers versus early 1990’s, a number of studies using increase in the tract’s minority percentage the degree to which they reflect the credit HMDA data (such as that reported in Tables between 1980 and 1990. Most of the quality of potential borrowers (as indicated B.1 and B.2) attempted to test for the neighborhood risk and demand variables by applicants’ available assets, credit rating, existence of mortgage redlining. Consistent were significant determinants of the flow of employment history, etc.). Some studies of with the redlining hypothesis, these studies conventional loans in Houston. The credit disparities have attempted to control found lower volumes of loans going to low- coefficients of the racial composition for credit risk factors that might influence a income and high-minority neighborhoods.13 variables were insignificant, which led lender’s decision to approve a loan. Without However, such analyses were criticized Holmes and Horvitz to conclude that fully accounting for the creditworthiness of because they did not distinguish between allegations of redlining in the Houston the borrower, racial differences in denial demand, risk, and supply effects 14—that is, market could not be supported. rates cannot be attributed to lender bias. they did not determine whether loan volume Schill and Wachter Study. Michael Schill The best example of accounting for credit was low because families in high-minority and Susan Wachter posited that the risk is the study by researchers at the Federal and low-income areas were unable to afford probability that a lender will accept a Reserve Bank of Boston, which analyzed home ownership and therefore were not specific mortgage application depends on mortgage denial rates.8 To control for credit applying for mortgage loans, or because characteristics of the individual loan risk, the Boston Fed researchers included 38 borrowers in these areas were more likely to application 17 and characteristics of the borrower and loan variables indicated by default on their mortgage obligations, or neighborhood where the property lenders to be critical to loan decisions. For because lenders refused to make loans to collateralizing the loan is located. Schill and example, the Boston Fed study included a creditworthy borrowers in these areas.15 16 Wachter included neighborhood risk proxies measure of the borrower’s credit history, Recent statistical studies have sought to that are likely to affect the future value of the which is a variable not included in other test the redlining hypothesis by more properties,18 and they included the studies. The Boston Fed study found that completely controlling for differences in percentage of the tract population comprised minorities’ higher denial rates could not be neighborhood risk and demand. The first two of African Americans and Hispanics in order explained fully by income and credit risk studies reviewed below are good examples of to test for the existence of racial factors. African Americans and Hispanics the more recent literature. In these studies, discrepancies in lending patterns across were about 60 percent more likely to be the explanatory power of neighborhood race census tracts. denied credit than Whites, even after is reduced to the extent that the effects of Testing their model for conventional controlling for credit risk characteristics such neighborhood risk and demand are mortgages in Philadelphia and Boston, Schill as credit history, employment stability, accounted for; thus, they do not support and Wachter found that the applicant race liquid assets, self-employment, age, and claims of racially induced mortgage variables—whether the applicant was African
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American or Hispanic—showed significant because they include a direct measure of transactions, the resulting lack of information negative effects on the probability that a loan borrower credit history, as well as the other available to lenders will result in higher would be accepted. Schill and Wachter stated underwriting, borrower, and neighborhood denial rates and more difficulty in obtaining that this finding does not provide evidence characteristics that are included in the mortgage financing, independently of the of individual race discrimination because Boston Fed data base; thus, his work does not level of credit risk in these neighborhoods. applicant race is most likely serving as a have the problem of omitted variables to the A number of empirical studies have found proxy for credit risk variables omitted from same extent as previous redlining studies.24 evidence consistent with the notion that their model (e.g., credit history, wealth and Tootell found that lenders in the Boston area mortgage credit is more difficult to obtain in liquid assets). In an initial analysis that did not appear to be redlining neighborhoods areas with relatively few recent sales excluded the neighborhood risk variables based on the racial composition of the census transactions. Some of these studies have also from the model, the percentage of the census tract or the average income in the tract. found that low transactions volume may tract that was African American also showed Consistent with the Boston Fed and Schill contribute to disparities in the availability of a significant and negative coefficient, a result and Wachter studies, Tootell found that it is mortgage credit by neighborhood income and that is consistent with redlining. However, the race of the applicant that mostly affects minority composition. when the neighborhood risk proxies were the mortgage lending decision; the location of Paul Calem found that, in low-minority included in the model along with the the applicant’s property appears to be far less tracts, higher mortgage loan approval rates individual loan variables, the percentage of relevant. However, he did find that the were associated with recent sales the census tract that was African American decision to require private mortgage transactions volume, consistent with the became insignificant. Thus, similar to insurance (PMI) depends on the racial Lang and Nakamura hypothesis.27 While this Holmes and Horvitz, Schill and Wachter composition of the neighborhood. Tootell effect was not found in high-minority tracts, stated that ‘‘once the set of independent suggested that, rather than redline he concludes that ‘‘informational returns to variables is expanded to include measures themselves, mortgage lenders may rely on scale’’ contribute to disparities in the that act as proxies for neighborhood risk, the private mortgage insurers to screen availability of mortgage credit between low- results do not reveal a pattern of applications from minority neighborhoods. minority and high-minority areas. Empirical redlining.’’ 19 Tootell also noted that this indirect form of research by David Ling and Susan Wachter Other Redlining Studies. To highlight the redlining would increase the price paid by found that recent tract-level sales transaction methodological problems of single-equation applicants from minority areas that are volume does significantly contribute to studies of mortgage redlining, Fred Phillips- approved by private mortgage insurers. mortgage loan acceptance rates in Dade Patrick and Clifford Rossi developed a In a 1999 paper, Stephen Ross and Geoffrey County, Florida, also consistent with the simultaneous equation model of the demand Tootell used the Boston Fed data base to take Lang and Nakamura hypothesis.28 and supply of mortgages, which they a closer at both lender redlining and the role Robert Avery, Patricia Beeson, and Mark of private mortgage insurance (PMI) in estimated for the Washington, DC Sniderman found significant evidence of neighborhood lending.25 They had two main metropolitan area.20 Phillips-Patrick and economies associated with the scale of findings. First, mortgage applications for Rossi found that the supply of mortgages is operation of individual lenders in a properties in low-income neighborhoods 29 negatively associated with the racial neighborhood. They concluded that ‘‘The were more likely to be denied if the applicant inability to exploit these economies of scale composition of the neighborhood, which led did not apply for PMI. Ross and Tootell them to conclude that the results of single- is found to explain a substantial portion of concluded that their study provides the first the higher denial rates observed in low- equation models (such as the one estimated direct evidence based on complete by Holmes and Horvitz) are not reliable income and minority neighborhoods, where underwriting data that some mortgage the markets are generally thin.’’ Low-income indicators of redlining or its absence. applications may have been denied based on However, Phillips-Patrick and Rossi noted and minority neighborhoods often suffer neighborhood characteristics that legally from low transactions volume, and low that even their simultaneous equations model should not be considered in the underwriting does not provide definitive evidence of transactions volume represents a barrier to process. Second, mortgage applicants were the availability of mortgage credit by making redlining because important underwriting often forced to apply for PMI when the variables (such as credit history), which are mortgage lenders more reluctant to approve housing units were in low-income and originate mortgage loans in these areas. omitted from their model, may be correlated neighborhoods. Ross and Tootell concluded with neighborhood race. that lenders appeared to be responding to d. Geographic Dimensions of Underserved A few studies of neighborhood redlining CRA by favoring low-income tracts once PMI Areas—Targeted versus Broad Approaches have attempted to control for the credit has been received, and this effect counteracts HUD’s definition of metropolitan history of the borrower, which is the main the high denial rates for applications without underserved areas is a targeted neighborhood omitted variable in the redlining studies PMI in low-income tracts. definition, rather than a broad definition that reviewed so far. Samuel Myers, Jr. and Tsze Studies of Information Externalities. A would encompass entire cities. It also focuses Chan, who studied mortgage rejections in the recent group of studies that focus on on those neighborhoods experiencing the state of New Jersey in 1990, developed a economies of scale in the collection of most severe credit problems, rather than proxy for bad credit based on the reasons that information about neighborhood neighborhoods experiencing only moderate lenders give in their HMDA reports for characteristics has implications for the difficulty obtaining credit. During the denying a loan.21 They found that 70 percent identification of underserved areas and regulatory process leading to the 1995 rule, of the gap in rejection rates could not be understanding the problems of mortgage some argued that underserved areas under explained by differences in Black and white access in low-income and minority this goal should be defined to include all borrower characteristics, loan characteristics, neighborhoods. William Lang and Leonard parts of all central cities, as defined by OMB. neighborhoods or bad credit. Myers and Chan Nakamura argue that individual home sale HUD concluded that such broad definitions concluded that the unexplained Black-white transactions generate information which were not a good proxy for mortgage credit gap in rejection rates is a result of reduce lenders’ uncertainty about property problems—to use them would allow the discrimination. With respect to the racial values, resulting in greater availability of GSEs to focus on wealthier parts of cities, composition of the census tract, they found mortgage financing.26 Conversely, appraisals rather than on neighborhoods experiencing that Blacks are more likely to be denied loans in neighborhoods where transactions occur credit problems. This section reports findings in racially integrated or predominantly-white infrequently will tend to be more imprecise, from several analyses by HUD and academic neighborhoods than in predominantly-Black resulting in greater uncertainty to lenders researchers that support defining neighborhoods. They concluded that middle- regarding collateral quality, and more underserved areas in terms of the minority class Blacks seeking to move out of the inner reluctance by them in approving mortgage and/or income characteristics of census city would face problems of discrimination loans in neighborhoods with thin markets. As tracts, rather than in terms of a broad in the suburbs.22 a consequence, ‘‘prejudicial practices of the definition such as all parts of all central Geoffrey Tootell has authored two papers past may lead to continued differentials in cities. on neighborhood redlining based on the lending behavior.’’ Socioeconomic Characteristics. The mortgage rejection data from the Boston Fed If low-income or minority tracts have targeted nature of HUD’s definition can be study.23 Tootell’s studies are important experienced relatively few recent seen from the data presented in Table B.3,
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Credit Characteristics. Tables B.1 and B.2 associated with certain location Avery, Beeson and Sniderman concluded documented the relatively high denial rates characteristics, and it is possible that, in the that a tract-level definition is a more effective and low mortgage origination rates in second or third best world in which we live, way to define underserved areas than using underserved areas as defined by HUD. This mortgage markets might be useful in helping the list of OMB-designated central cities as a section extends that analysis by comparing to solve some of these problems. We then proxy. underserved and served areas within central might use these data to help single out cities and suburbs. Figure B.1 shows that important areas or at least eliminate some e. Conclusions from HUD’s Analysis and the HUD’s definition targets central city bad choices. * * * The regression results Economics Literature About Urban neighborhoods that are experiencing indicate that income and minority status are Underserved Areas problems obtaining mortgage credit. The 19.6 better indicators of areas with special needs The implications of studies by HUD and percent denial rate in these neighborhoods in than central city location.34 others for defining underserved areas can be 1998 was nearly twice the 10.6 percent Avery, Beeson, and Sniderman Study. summarized briefly. First, the existence of denial rate in the remaining areas of central Robert Avery, Patricia Beeson, and Mark large geographic disparities in mortgage cities. A broad, inclusive definition of Sniderman of the Federal Reserve Bank of credit is well documented. HUD’s analysis of ‘‘central city’’ that includes all areas of all Cleveland presented a paper specifically OMB-designated central cities would include addressing the issue of underserved areas in HMDA data shows that low-income and these ‘‘remaining’’ portions of cities. Figure the context of the GSE legislation.35 Their high-minority neighborhoods receive B.1 shows that these areas, which account for study examined variations in application substantially less credit than other approximately 43 percent of the population rates and denial rates for all individuals and neighborhoods and fit the definition of being in OMB-designated central cities, appear to census tracts included in the 1990 and 1991 underserved by the nation’s credit markets. be well served by the mortgage market. As a HMDA data base. They sought to isolate the Second, researchers are testing models that whole, they are not experiencing problems differences that stem from the characteristics more fully account for the various risk, obtaining mortgage credit.30 of the neighborhood itself rather than the demand, and supply factors that determine HUD’s definition also targets underserved characteristics of the individuals that apply the flow of credit to urban neighborhoods. census tracts in the suburbs as well as in for loans in the neighborhood or lenders that The studies by Holmes and Horvitz, Schill central cities—for example, the average happen to serve them. Similar to the studies and Wachter, and Tootell are examples of denial rate in underserved suburban areas of redlining reviewed in the previous section, this research. Their attempts to test the (19.2 percent) is more than twice that in the Avery, Beeson and Sniderman hypothesized redlining hypothesis show the analytical remaining served areas of the suburbs (10.1 that variations in mortgage application and insights that can be gained by more rigorous percent). Low-income and high-minority denial rates would be a function of several suburban tracts appear to have credit risk variables such as the income of the modeling of this issue. However, the fact that problems similar to their central city applicant and changes in neighborhood our urban areas are highly segregated means counterparts. These suburban tracts, which house values; they tested for independent that the various loan, applicant, and account for 40 percent of the suburban racial effects by adding to their model the neighborhood characteristics currently being population, are encompassed by the applicant’s race and the racial composition of used to explain credit flows are often highly definition of other underserved areas. the census tract. Econometric techniques correlated with each other, which makes it As explained in the Preamble, HUD asked were used to separate individual applicant difficult to reach definitive conclusions about for public comment on two options that effects from neighborhood effects. the relative importance of any single variable would tighten the targeting of the Based on their empirical work, Avery, such as neighborhood racial composition. underserved areas definition and reduce the Beeson and Sniderman reached the following Thus, their results are inconclusive and, number of qualifying census tracts. After conclusions: thus, the need continues for further research • examining the comments the Department has The individual applicant’s race exerts a on the underlying determinants of geographic decided to wait until the release of the 2000 strong influence on mortgage application and disparities in mortgage lending.38 Census Bureau data. In addition to providing denial rates. African American applicants, in Finally, much research strongly supports a updated information on neighborhoods, the particular, had unexplainably high denial targeted definition of underserved areas. rates. 2000 Census Bureau will incorporate changes Studies by Shear, et al. and Avery, Beeson, adopted by the Metropolitan Area Standards • Once individual applicant and other and Sniderman conclude that characteristics Review Committee that will impact the neighborhood characteristics were controlled of both the applicant and the neighborhood boundaries of current metropolitan areas.31 for, overall denial rates for purchase and Shear, Berkovec, Dougherty, and Nothaft refinance loans were only slightly higher in where the property is located are the major Study. William Shear, James Berkovec, Ann minority census tracts than non-minority determinants of mortgage denials and Dougherty, and Frank Nothaft conducted an census tracts.36 For white applicants, on the origination rates—once these characteristics analysis of mortgage flows and application other hand, denial rates were significantly are controlled for, other influences such as acceptance rates in 32 metropolitan areas that higher in minority tracts.37 That is, central city location play only a minor role supports a targeted definition of underserved minorities had higher denial rates wherever in explaining disparities in mortgage lending. areas.32 They found: (a) Low-income census they attempted to borrow, but whites faced HUD’s analysis shows that both credit and tracts and tracts with high concentrations of higher denials when they attempt to borrow socioeconomic problems are highly African American and Hispanic families had in minority neighborhoods. In addition, concentrated in underserved areas within lower rates of mortgage applications, Avery et al. found that home improvement central cities and suburbs. The remaining, originations, and acceptance rates; 33 and (b) loans had significantly higher denial rates in high-income portions of central cities and once census tract influences were accounted minority neighborhoods. Given the very suburbs appear to be well served by the for, central city location had only a minimal strong effect of the individual applicant’s mortgage market. effect on credit flows. Shear, Berkovec, race on denial rates, Avery et al. noted that HUD recognizes that the mortgage Dougherty, and Nothaft recognized that it is since minorities tend to live in segregated origination and denial rates forming the basis difficult to interpret their estimated minority communities, a policy of targeting minority for the research mentioned in the preceding effects—the effects may indicate lender neighborhoods may be warranted. paragraph, as well as for HUD’s definition of discrimination, supply and demand effects Other findings were: not included in their model but correlated • The median income of the census tract underserved areas, are the result of the with minority status, or some combination of had strong effects on both application and interaction of individual risk, demand and these factors. They explain the implications denial rates for purchase and refinance loans, supply factors that analysts have yet to fully of their results for measuring underserved even after other variables were accounted for. disentangle and interpret. The need areas as follows: • There was little difference in overall continues for further research addressing this While it is not at all clear how we might denial rates between central cities and problem. HUD believes, however, that the rigorously define, let alone measure, what it suburbs, once individual applicant and economics literature is consistent with a means to be underserved, it is clear that there census tract characteristics were controlled targeted rather than a broad approach for are important housing-related problems for. defining underserved areas.
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C. Consideration of Factors 1 and 2 in compared with area income for metropolitan growing demand for manufactured housing Nonmetropolitan Areas: The Housing Needs areas, in rural counties income is compared in rural housing markets. It also discusses of Underserved Rural Areas and the with ‘‘enhanced income’’—the greater of state characteristics of rural housing markets that Housing, Economic, and Demographic nonmetro income and national nonmetro lead to higher interest rates and mortgage Conditions in Underserved Rural Areas income. This is based on HUD’s analysis of access problems and makes some policy 1990 census data, which indicated that Because of the absence of HMDA data for recommendations for addressing market comparing county nonmetro income only to rural areas, the analysis for metropolitan inefficiencies. state nonmetro income would lead to the underserved areas cannot be carried over to exclusion of many lower-income low- 1. Demographics non-metropolitan areas. Based on discussions minority counties from the definition, with rural lenders in 1995, the definition of As discussed, majorities of rural especially in Appalachia. Underserved households and rural counties fall under the underserved rural areas was established at counties account for 57 percent (8,091 of the county level, since such lenders usually definition of underserved areas. As shown in 14,419) of the census tracts and 54 percent Table B.4, rural underserved counties have do not make distinctions on a census tract of the population in rural areas. By higher unemployment, poverty rates, basis. But this definition parallels that used comparison, the definition of metropolitan minority shares of households, and in metropolitan areas—specifically, a underserved areas encompassed 47 percent nonmetro county is classified as an of metropolitan census tracts and 44 percent homeownership rates than rural served underserved area if median income of of metropolitan residents. The county-wide counties. The poverty rate in underserved families in the county does not exceed 95 definition of rural underserved areas could rural counties (21.2 percent) is nearly twice percent of the greater of state nonmetro or give the GSEs an incentive to purchase that in served rural counties (12.2 percent). national nonmetro median income, or mortgages in the ‘‘better served’’ portions of Joblessness is more common, with average minorities comprise 30 percent or more of underserved counties which may face few, if unemployment rates of 8.3 percent in the residents and the median income of any, barriers to accessing mortgage credit in underserved counties and 5.9 percent in families in the county does not exceed 120 rural areas. This issue is discussed in more served counties. Minorities make up 20.8 percent of the greater of state nonmetro or detail in the proposed Rule. percent of the residents in underserved national nonmetro median income. For The demographic characteristics of served counties and 7.4 percent in served counties. nonmetro areas the median income and underserved counties are first presented Homeownership is slightly higher in component of the underserved areas in this section. Next, a literature review of underserved counties (72.4 percent) than in definition is broader than that used for recent studies provides an overview of rural served counties (70.8 percent). metropolitan areas. While tract income is mortgage markets, GSE activity, and the BILLING CODE 4210±27±P
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BILLING CODE 4210±27±C
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Some differences exist between metro and Rural lenders are less likely than urban originators in nonmetropolitan areas may nonmetro underserved areas. The definition lenders to participate in the secondary interpret guidelines too conservatively, or is somewhat more inclusive in nonmetro mortgage market. As a result, rural borrowers may not try to qualify non-traditional areas—the majority of the nonmetro do not receive the benefits associated with borrowers for mortgages. population lives in underserved counties, the secondary market—the increased MacDonald also echoes the findings of while the majority of the metropolitan competition between lenders, the greater Mikesell that the existence and extent of population lives in served areas. The potential supply of mortgage financing, and mortgage lending problems are difficult to majority of units in underserved the alignment of financing costs more closely identify in many rural areas because of the metropolitan areas are occupied by renters, with those in urban markets. lack of comprehensive mortgage lending while the majority of units in underserved Some obstacles for rural lenders data. Problems that have been identified rural counties are occupied by owners. But participating in the secondary market are that include the lack of market competition poverty and unemployment rates are higher borrower characteristics and remote among small, conservative lending in underserved areas than in served areas in properties may not conform to the secondary institutions typical in rural and non- both nonmetropolitan and metropolitan market’s underwriting standards. Rural metropolitan areas; consolidation and other areas. households may have their borrowing changes in the financial services industry, 2. Literature Review capacity reduced by loan qualification which may have different consequences in standards which discount income that varies rural areas than in urban areas; lack of access Research related to housing and mortgage widely from year to year and income from to government housing finance programs in finance issues in rural areas is reviewed in self-employment held for less than several more rural locations; and weak development this section. It finds that lack of competition years. Rural properties may have one or more of secondary market sources of funds in rural between rural lenders and lack of of the following characteristics which areas, exacerbating liquidity problems. participation in secondary mortgage markets preclude a mortgage from being purchased by MacDonald discusses briefly the may contribute to higher interest rates and the GSEs: excessive distance to a firehouse, importance of low-cost homeownership lower mortgage availability in rural areas. unacceptable water or sewer facilities, alternatives in rural areas. One alternative is The mortgages purchased by the GSEs on location on a less-than-all-weather road, and manufactured (mobile) housing. In general, properties in underserved counties are not dated plumbing or electrical systems. manufactured housing is less costly to particularly focused on lower-income Mikesell concludes that increased construct than site-built housing. borrowers and first-time homebuyers, which participation by rural lenders in the Manufactured housing makes up more than suggests that additional research needs to be secondary mortgage market would bring 25 percent of the housing stock in rural conducted to target areas in nonmetropolitan down lending costs and offset some of the counties in the South and Mountain states. areas which experience difficulty accessing higher costs characteristic of rural lending, MacDonald concludes that the lower mortgage credit. The role of manufactured and that HUD’s goals for the GSEs could participation of the GSEs in underserved housing in providing affordable housing in encourage such increased participation. areas compared with served areas may result rural areas is also discussed. MacDonald Study.41 This study from additional risk components for some Mikesell Study (1998).39 A study by Jim investigates variations in GSE market shares borrowers and from lack of sophistication by Mikesell provides an overview of mortgage the lenders that serve small non-metro lending in rural areas. It finds that home among a sample of 426 non-metropolitan loans in rural areas have higher costs, which counties in eight census divisions. markets. In smaller and poorer counties, low can be attributed to at least three factors that Conventional conforming mortgage volumes of loan sales to the GSEs may be a characterize rural mortgage markets. First, originations are estimated using residential result of lower incomes and smaller the fixed cost associated with rural lending sales data, adjusted to exclude non- populations. These counties may not have may be higher as a result of the smaller loan conforming mortgages. Multivariate analysis sufficient loan-generating activity to justify size and remoteness of many rural areas. is used to investigate whether the GSE mortgage originators pursuing secondary Second, there are fewer mortgage lenders in market share differs significantly by location, market outlets. 43 rural areas competing for business, which after controlling for the economic, The Role of Manufactured Housing. The may account for higher interest rates. Third, demographic, housing stock, and credit Joint Center for Housing Studies at Harvard the secondary mortgage market is not as well market differences among counties that could University conducted a comprehensive study developed as in metropolitan areas. affect use of the secondary markets by of the importance of manufactured housing 42 Higher interest rates for rural mortgages are lenders. as an affordable housing choice in rural documented by the Federal Housing Finance MacDonald has four main findings communities. In all segments of the housing Board’s monthly survey of conventional regarding mortgage financing and the GSEs’ market, but especially in rural areas and home purchase mortgages. On average, purchases in rural mortgage markets. First, among low-income households, relative to rates on mortgages in urban areas, smaller, poorer and less rapidly growing non- manufactured housing is growing. Based on rates on mortgages in rural areas in 1997 metro areas have less access to mortgage the American Housing Survey, in 1985, 61 were 8 basis points (bp) higher on 30-year credit than larger, wealthier and more rapidly percent of the manufactured housing stock fixed rate mortgages (FRMs), 18 bp higher for growing areas. Second, the mortgages that are was located in rural areas, compared with 70 15-year FRMs, 38 bp higher for adjustable- originated in the former areas are seldom percent in 1993. Between 1985 and 1993, rate mortgages (ARMs), and 52 bp higher for purchased by the GSEs. Third, higher-income manufactured housing increased over 2.2 nonstandard loans.40 The higher rates in borrowers are more likely, and first-time percent annually while all other housing rural areas translate into differences in homebuyers are less likely, to be served by increased 0.7 percent per year. In 1993, 6.0 monthly payments of $3 to $16 for a the GSEs in underserved areas than in served percent (or 6 million) of households lived in $100,000 mortgage. areas. This suggests that the GSEs are not manufactured housing. Mikesell finds that property location and reaching out to marginal borrowers in Since the 1970’s, the face of manufactured small loan size are two factors that make underserved nonmetropolitan areas. Finally, housing has changed. Once a highly mobile lending more costly in rural areas. Borrower the GSEs serve a smaller proportion of the form of recreational housing in this country, characteristics, such as income, assets, and low-income market in rural areas than do today manufactured housing provides basic credit history, and lender characteristics, depository institutions. This finding is quality, year-round housing for millions of such as ownership, size, and location, might consistent with studies of the GSEs’ American households. Most earlier units influence loan pricing, but the influence of affordable lending performance in were placed in mobile home parks or on these factors could not be tested due to lack metropolitan areas. leased parcels of land. Today an increasing of data. With regard to the GSEs’ underwriting number of units are owned by households Rural-based lenders are fewer and originate guidelines MacDonald makes two points. that also own the land on which the a smaller volume of loans than their urban First, the GSEs’ purchase guidelines may manufactured home is located. counterparts. These factors contribute to less adversely affect non-metro areas where many Manufactured housing’s appeal lies in its competition between rural lenders and a less borrowers are seasonally-or self-employed affordability. The low purchase price, efficient housing finance market, which and where houses pose appraisal problems. downpayments, and monthly cash costs of result in higher costs for rural borrowers. Second, MacDonald speculates that mortgage manufactured housing provide households
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1996 1997 1998 1999
Fannie Mae: Units Eligible to Count Toward Goal ...... 1,891,896 1,765,347 3,546,302 2,956,155 Geographically Targeted Units ...... 532,434 508,746 958,233 791,593 Percent Geographically Targeted ...... 28.1 28.8 27.0 26.8 Freddie Mac: Units Eligible to Count Toward Goal ...... 1,325,900 1,180,517 2,658,556 2,245,087 Geographically Targeted Units ...... 331,495 310,572 693,748 618,385 Percent Geographically Targeted ...... 25.0 26.3 26.1 27.5
Thus, Fannie Mae and Freddie Mac 14 percent increase for Fannie Mae. As a from 10.4 percent in 1998 to 9.8 percent in surpassed the goals in 1996 by 7.1 percentage result, Freddie Mac’s performance in 1999 1999. points and 4.0 percentage points, (27.5 percent) was 103 percent of Fannie respectively. And both GSEs surpassed the Mae’s geographically targeted share last year 2. GSEs’ Mortgage Purchases in 1997–99 goals by at least 2 percentage points (26.8 percent)—the only year in which Metropolitan Neighborhoods in each of these three years. Freddie Mac’s performance on this goal has As shown in Table B.5, metropolitan areas Fannie Mae’s performance on the exceeded Fannie Mae’s performance. The accounted for about 85 percent of total GSE Geographically Targeted Goal jumped main reason why Freddie Mac moved past purchases under the Geographically Targeted sharply in just two years, from 23.6 percent Fannie Mae in performance on the Goal in 1998 and 1999. This section uses in 1993 to 31.9 percent in 1995, before tailing Geographically Targeted Goal last year is that HMDA and GSE data for metropolitan areas off to 28.1 percent in 1996. As indicated, it the geographically-targeted share of Freddie to examine the neighborhood characteristics then rose slightly to 28.8 percent in 1997, Mac’s total single-family mortgage purchases of the GSEs’ mortgage purchases. In before tailing off to 27.0 percent in 1998 and rose from 24.5 percent in 1998 to 26.7 45 subsection 2.a, the GSEs’ performance in 26.8 percent in 1999. Freddie Mac has percent in 1999, exceeding the corresponding underserved neighborhoods is compared shown more steady gains in performance on increase for Fannie Mae, from 24.8 percent in with that of portfolio lenders and the overall the Geographically Targeted Goal, from 21.3 1998 to 25.5 percent in 1999. A second market. This section therefore expands on the percent in 1993 to 24.2 percent in 1994, 25.0 reason why Freddie Mac surpassed Fannie percent in 1995–96, just over 26 percent in Mae in performance on this goal last year is discussion in Appendix A, which compared 1997–98, and 27.5 percent in 1999.46 that multifamily properties are ‘‘goal-rich’’- the GSEs’ funding of affordable loans with Fannie Mae’s performance on the that is, they are more likely to be in the overall conventional conforming market. Geographically Targeted Goal has surpassed underserved areas than single-family units, In subsection 2.b., the characteristics of the Freddie Mac’s in every year from 1993 and the multifamily share of purchases GSEs’ purchases within underserved areas through 1998. However, Freddie Mac’s 1999 eligible for this goal rose slightly for Freddie are compared with those for their purchases performance represented a 26 percent Mac, from 8.3 percent in 1998 to 8.5 percent in served areas. increase over the 1993 level, exceeding the in 1999, but fell somewhat for Fannie Mae, BILLING CODE 4210±27±P
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BILLING CODE 4210±27±C
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The findings with respect to ratio of only 0.81 (i.e. 20.0 divided by 24.6). a slightly higher underserved area percentage the GSEs’ funding of underserved Fannie Mae—1993–1998. Over the longer (18.6 percent) than Fannie Mae (18.3 neighborhoods are similar to those reported 1993–98 period and the more recent 1996–98 percent). However, Freddie Mac’s in Appendix A regarding the GSEs’ overall period, Fannie Mae has lagged the market underserved area percentage had only and portfolio lenders in funding properties in affordable lending performance. While both increased to 20.0 percent by 1998 (versus underserved areas, but to a much smaller GSEs improved their performance over the 22.9 percent for Fannie Mae). Thus, the degree than Freddie Mac. During the 1996– 1993–1998 period, they lagged the ‘‘Freddie Mac-to-market’’ ratio fell from 0.84 98 period, underserved tracts accounted for conventional conforming market in providing in 1992 to 0.81 in 1998. affordable loans to underserved 22.9 percent of Fannie Mae’s purchases, 1999 GSE Purchases. In 1999, Freddie neighborhoods. As discussed in Appendix A, compared with 25.8 percent of loans retained Mac’s funding of both home purchase loans the two GSEs showed very different patterns in portfolio by depositories and with 24.9 of lending—Freddie Mac was much less percent of home loans originated in the and total (combined home purchase and likely than Fannie Mae to fund home loans conventional conforming market. Fannie refinance) loans in underserved in underserved neighborhoods through 1998. Mae’s performance is much closer to the neighborhoods improved to the point that it The percentage of Freddie Mac’s purchases market than Freddie Mac’s performance, as surpassed Fannie Mae’s performance. In financing properties in underserved census can be seen by the ‘‘Fannie Mae-to-market’’ 1999, underserved areas accounted for 21.2 tracts was substantially less than the ratio of 0.92 for the 1996–98 period (i.e. 22.9 percent of Freddie Mac’s purchases of home percentage of total market originations in divided by 24.9).Fannie Mae’s performance purchase loans in metropolitan areas—a these tracts; furthermore, by 1998 Freddie improved during 1997, due mainly to Fannie figure slightly higher than the 20.6 percent Mac had not made progress closing the gap Mae’s increased purchases during 1997 of for Fannie Mae. With respect to combined with the primary market. Fannie Mae, on the prior-year mortgages in underserved home purchase and refinance loans, Freddie other hand, was much closer to 1998 market neighborhoods. Overall, Fannie Mae’s Mac’s underserved areas percentage in levels in its funding of underserved areas. purchases of home loans in underserved metropolitan areas jumped by 2.6 percentage The GSE data for 1999 show a shift in these areas increased from 22.3 percent in 1996 to points, from 20.9 percent in 1998 to 23.5 patterns—during 1999, Freddie Mac 23.5 percent in 1997. The underserved area percent in 1999, while the corresponding surpassed Fannie Mae in funding mortgages percentage for Fannie Mae’s purchases of percentage for Fannie Mae increased by only in underserved neighborhoods. newly-originated mortgages was actually 0.6 percentage point, from 21.2 percent in Freddie Mac—1993–1998. While Freddie lower in 1997 (20.8 percent) than in 1996 1998 to 21.8 percent in 1999. Mac lagged Fannie Mae, portfolio lenders, (21.9 percent). This decline was offset by the Down Payment Characteristics. Table B.6 and the overall conforming market in fact that a particularly high percentage (30.1 reports the down payment and borrower providing home loans to underserved percent) of Fannie Mae’s 1997 purchases of income characteristics of mortgages that the prior-year mortgages was for properties in neighborhoods during the 1993–1998 period, GSEs purchased in underserved areas during underserved areas. Thus, Fannie Mae it pulled ahead of Fannie Mae during 1999 1999. Two points stand out. First, loans on in purchasing mortgages for properties improved its overall performance in 1997 by properties in underserved areas were more located in urban underserved areas supplementing its purchases of newly- likely to have a high loan-to-value ratio than (discussed below). Over the 1993–1998 originated mortgages with purchases of prior- loans on properties in served areas. period, underserved census tracts accounted year mortgages targeted to underserved for 19.7 percent of Freddie Mac’s single- neighborhoods. As shown in Table A.4a in Specifically, about 15.4 percent of loans in family home mortgages, compared with 22.9 Appendix A, Fannie Mae continued this underserved areas had a down payment less percent of Fannie Mae’s purchases, 26.3 strategy in 1998, but not in 1999. The annual than ten percent, compared with 13.4 percent percent of loans originated and held in data in Table A.4a show the progress that of all loans purchased by the GSEs. Second, portfolio by depository lenders, and 24.5 Fannie Mae has made in closing the gap loans to low-income borrowers in percent of the overall conforming primary between its performance and that of the underserved areas were typically high down market. If the analysis is restricted to the overall market. In 1992, underserved areas payment loans. Approximately 70 percent of 1996–98 period during which the current accounted for 18.3 percent of Fannie Mae’s the GSE-purchased loans to very low-income housing goals have been in effect, the data purchases and 22.2 percent of market borrowers living in underserved areas had a continue to show that Freddie Mac lagged the originations, for a ‘‘Fannie Mae-to-market’’ down payment more than 20 percent. market in funding underserved ratio of 0.82. By 1998, underserved areas BILLING CODE 4210±27±P
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BILLING CODE 4210±27±C than 40 or younger than 30. And, as Minorities’ share of the GSEs’ mortgage b. Characteristics of GSEs’ Purchases of expected, they are more likely to have below- purchases in underserved areas (30.1 Mortgages on Properties in Metropolitan median income and to be members of percent) was nearly three times their share in Underserved Areas minority groups. For example, first-time served areas (11.4 percent). And the pattern homebuyers make up 12.0 percent of the was even more pronounced for African Several characteristics of loans purchased GSEs’ mortgage purchases in underserved by the GSEs in metropolitan underserved Americans and Hispanics, who accounted for areas and 10.4 percent of their business in 20.9 percent of the GSEs’ business in areas are presented in Table B.7. As shown, served areas. In underserved areas, 54.7 underserved areas, but only 5.5 percent of borrowers in underserved areas are more percent of borrowers had incomes below the their purchases in served areas. likely than borrowers in served areas to be area median, compared with 35.9 percent of first-time homebuyers, females, and older borrowers in served areas.
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3. GSE Mortgage Purchases in lending for metropolitan areas is provided by income borrowers in underserved than in Nonmetropolitan Areas the Home Mortgage Disclosure Act (HMDA); served counties. Mortgages to first-time Nonmetropolitan mortgage purchases made however, no comparable data source exists homebuyers accounted for 8.4 percent of the for rural mortgage markets. The absence of up 13 percent of the GSEs’ total mortgage GSEs’ 1999 mortgage purchases in served rural market data is a constraint for purchases in 1999. Mortgages in underserved counties, compared with 7.3 percent of their evaluating credit gaps in rural mortgage purchases in underserved counties. counties made up 39 percent of the GSEs’ lending and for defining underserved areas. business in nonmetropolitan areas. 47 Surprisingly, borrowers in served counties One concern is whether the broad were more likely to have incomes below the Unlike the underserved areas definition for definition overlooks differences in borrower median than in underserved counties (37.9 metropolitan areas, which is based on census characteristics in served and underserved tracts, the rural underserved areas definition counties that should be included. Table B.8 percent, compared to 33.6 percent). These is based on counties. Rural lenders argued compares borrower and loan characteristics findings lend some support to the claim that, that they identified mortgages by the counties for the GSEs’ mortgage purchases in served in rural underserved counties, the GSEs in which they were located rather than the and underserved areas. purchase mortgages for borrowers that census tracts; and therefore, census tracts The GSEs are slightly less likely to probably encounter few obstacles in were not an operational concept in rural purchase loans for first-time homebuyers and obtaining mortgage credit. areas. Market data on trends in mortgage more likely to purchases mortgages for high- BILLING CODE 4210±27±P
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BILLING CODE 4210±27±C above 80 percent are more likely to be in E. Factor 4: Size of the Conventional There are similarities and differences underserved counties than in served Conforming Mortgage Market for between the types of loans that Fannie Mae counties. The GSEs differ in that Freddie Mac Underserved Areas and Freddie Mac purchase in served and is more likely to purchase seasoned HUD estimates that underserved areas underserved counties. The GSEs are similar mortgages in served than in underserved account for 29–32 percent of the in that they are more likely to purchase counties, while the reverse is true for Fannie conventional conforming mortgage market. refinance loans in underserved counties than Mae. The analysis underlying this estimate is in served counties and that, in general, detailed in Appendix D. mortgage purchases with loan-to-value ratios
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F. Factor 5: Ability To Lead the Industry unless changed by the Secretary prior to that neighborhoods, and the barriers posed by This factor is the same as the fifth factor time. The goal represents an increase over the underwriting guidelines to potential minority considered under the goal for mortgage 1996 goal of 21 percent and the 1997–2000 and low-income borrowers. Studies reviewed purchases on housing for low- and moderate- goal of 24 percent. However, it is in Section B of this Appendix found that the income families. Accordingly, see Section G commensurate with the market share racial and income composition of of Appendix A for a discussion of this factor. estimates of 29–32 percent, presented in neighborhoods influence mortgage access Appendix D. even after accounting for demand and risk G. Factor 6: Need to Maintain the Sound This section summarizes the Secretary’s factors that may influence borrowers’ Financial Condition of the Enterprises consideration of the six statutory factors that decisions to apply for loans and lenders’ HUD has undertaken a separate, detailed led to the choice of these goals. It discusses decisions to make those loans. Therefore, the economic analysis of this rule, which the Secretary’s rationale for defining these Secretary concludes that high-minority and includes consideration of (a) the financial geographically-targeted areas and it compares low-income neighborhoods in metropolitan returns that the GSEs earn on loans in the characteristics of such areas and areas are underserved by the mortgage underserved areas and (b) the financial safety untargeted areas. The section draws heavily system. and soundness implications of the housing from earlier sections which have reported 2. Identifying Underserved Portions of goals. Based on this economic analysis and findings from HUD’s analyses of mortgage Metropolitan Areas discussions with the Office of Federal credit needs as well as findings from other Housing Enterprise Oversight, HUD research studies investigating access to To identify areas underserved by the concludes that the goals raise minimal, if mortgage credit. mortgage market, HUD focused on two any, safety and soundness concerns. traditional measures used in a number of 1. Credit Needs in Metropolitan Areas studies based on HMDA data: 48 application H. Determination of the Geographically- HUD’s analysis of HMDA data shows that denial rates and mortgage origination rates Targeted Areas Housing Goals mortgage credit flows in metropolitan areas per 100 owner-occupied units.49 Tables B.1 The annual goal for each GSE’s purchases are substantially lower in high-minority and and B.2 in Section B of this Appendix of mortgages financing housing for properties low-income neighborhoods and mortgage presented detailed data on denial and located in geographically-targeted areas denial rates are much higher for residents of origination rates by the racial composition (central cities, rural areas, and other such neighborhoods. The economics and median income of census tracts for underserved areas) is established at 31 literature discusses the underlying causes of metropolitan areas.50 Aggregating this data is percent of eligible units financed in each of these disparities in access to mortgage credit, useful in order to examine denial and calendar years 2001–03. The 2001–03 goal particularly as related to the roles of origination rates for broader groupings of will remain in effect in subsequent years, discrimination, ‘‘redlining’’ of specific census tracts:
Minority composition Denial rate Orig. Tract income Denial rate Orig. (percent) (percent) rate (percent) (percent) rate
0±30 ...... 11.4 16.4 Less than 90 ...... 19.8 10.7 30±50 ...... 17.2 12.5 90±120 ...... 13.0 15.5 50±100 ...... 21.9 9.4 Greater than 120 ...... 8.3 19.2
Two points stand out from these data. First, origination rates between underserved areas This definition of metropolitan high-minority census tracts have higher and adequately served areas. For example, underserved areas includes 21,586 of the denial rates and lower origination rates than the mortgage denial rate in underserved areas 46,904 census tracts in metropolitan areas, low-minority tracts. Specifically, tracts that (19.4 percent) was nearly twice that in covering 44 percent of the metropolitan are over 50 percent minority have nearly adequately served areas (10.3 percent) in population. It includes 73 percent of the twice the denial rate and two-thirds the 1999. population living in poverty in metropolitan origination rate of tracts that are under 30 These minority population and income areas. The unemployment rate in percent minority.51 Second, census tracts thresholds apply in the suburbs as well as in with lower incomes have higher denial rates OMB-defined central cities. HUD’s research underserved areas is more than twice that in and lower origination rates than higher has found that the average denial rate in served areas, and rental units comprise 52.4 income tracts. Tracts with income less than underserved suburban areas is almost twice percent of total units in underserved tracts, or equal to 90 percent of area median income that in adequately served areas in the versus 28.6 percent of total units in served have nearly 2.5 times the denial rate and suburbs. (See Figure B.1 in Section B of this tracts. As shown in Table B.9, this definition three-fourths the origination rate for tracts Appendix.) Thus HUD uses the same covers most of the population in the nation’s with income over 120 percent of area median definition of underserved areas throughout most distressed central cities: Newark (99 income. metropolitan areas—there is no need to percent), Detroit (96 percent), Hartford (97 In 1995, HUD’s research determined that define such areas differently in central cities percent), and Cleveland (90 percent). The ‘‘underserved areas’’ could best be and in the suburbs. And HUD’s definition, nation’s five largest cities also contain large characterized in metropolitan areas as census which covers 57 percent of the central city concentrations of their population in tracts with minority population of at least 30 population and 33 percent of the suburban percent in 1990 and/or census tract median population, is clearly preferable to a underserved areas: New York (62 percent), income no greater than 90 percent of area definition which would count 100 percent of Los Angeles (69 percent), Chicago (77 median income in 1990, excluding high- central city residents and zero percent of percent), Houston (67 percent), and minority high-income tracts. These cutoffs suburban residents as living in underserved Philadelphia (80 percent). produced sharp differentials in denial and areas. BILLING CODE 4210±27±P
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3. Identifying Underserved Portions of conventional conforming home purchase of the underserved areas share of the single- Nonmetropolitan Areas market, Fannie Mae improved its funding in family-owner mortgage market in Recognizing the difficulty of defining rural underserved areas and closed the gap metropolitan areas was 22.2 percent for underserved areas and the need to encourage between its performance and the single- 1992–94, but 25.1 percent for 1995–98 and GSE activity in such areas, HUD has chosen family primary market in funding low- 24.1 percent for the 1992–98 period as a a rather broad, county-based definition of income and high-minority neighborhoods.52 whole. underservedness in rural areas. Specifically, However, between 1998 and 1999, Freddie Third, as discussed in detail in Appendix a nonmetropolitan county is underserved if Mac improved its purchases in underserved A, there are several market segments that in 1990 (1) county median family income areas so much that its performance surpassed would benefit from a greater secondary was less than or equal to 95 percent of the Fannie Mae’s performance. In 1999, market role by the GSEs; many of these greater of state or national nonmetropolitan underserved areas accounted for 21.2 (23.5) market segments are concentrated in income or (2) county median family income percent of Freddie Mac’s purchases of home underserved areas. For example, one such was less than or equal to 120 percent of the (total) loans, compared with 20.6 (21.8) area is single-family rental dwellings. These greater of state or national nonmetropolitan percent of Fannie Mae’s purchases of home properties, containing 1–4 rental units, are an income and county minority population was (total) loans. important source of housing for families in at least 30 percent of total county population. HUD also conducted an analysis of the low-income and high-minority This definition includes 1,511 of the 2,305 share of the overall (single-family and neighborhoods. However, the GSEs’ counties in nonmetropolitan areas and covers multifamily) conventional conforming purchases accounted for only 14/19 percent 54 percent of the nonmetropolitan mortgage market accounted for by the GSEs. of the single-family rental units financed in population. The definition does target the As shown in Tables A.7a and A.7b of underserved areas during 1997/1998. The most disadvantaged rural counties—it Appendix A, the GSEs’ purchases Secretary believes that the GSEs can do more includes as underserved areas 67 percent of represented 40/55 percent of total dwelling to play a leadership role in providing the nonmetropolitan poor and 75 percent of units financed during 1997/1998, but they financing for such properties. Examples of nonmetropolitan minorities. The average represented only 33/46 percent of the other market segments in need of an poverty rate in underserved counties in 1990 dwelling units financed in underserved enhanced GSE role include small multifamily was 21 percent, significantly greater than the neighborhoods. In other words, the GSEs properties, rehabilitation loans, seasoned 12 percent poverty rate in counties accounted for less than half of the single- CRA loans, and manufactured housing. designated as adequately served. The family and multifamily units financed in Additional efforts by the GSEs in these definition also includes 84 percent of the underserved areas. This suggests that there is markets would benefit families living in population that resides in remote counties room for the GSEs to increase their purchases underserved areas. that are not adjacent to metropolitan areas in underserved neighborhoods. Finally, a wide variety of quantitative and and have fewer than 2,500 residents in qualitative indicators indicate that the GSEs’ towns. 5. Size of the Mortgage Market for have the financial strength to improve their Geographically-Targeted Areas affordable lending performance. For example, 4. Past Performance of the GSEs As detailed in Appendix D, the market for combined net income has risen steadily over The GSEs’ performance on the mortgages in geographically-targeted areas the last decade, from $677 million in 1987 to geographically-targeted goal has improved accounts for 29 to 32 percent of dwelling $6.1 billion in 1999, an average growth rate significantly in recent years, as shown in units financed by conventional conforming of 20 percent per year. This financial strength Figure B.2. Fannie Mae’s performance, as mortgages. In estimating the size of the provides the GSEs with the resources to lead measure by HUD, increased sharply from market, HUD used alternative assumptions the industry in supporting mortgage lending 23.6 percent in 1993 to 31.9 percent in 1995, about future economic and market conditions for properties located in geographically- dropped to 28.1 percent in 1996, rose to 28.8 that were less favorable than those that targeted areas. percent in 1997, and then dropped to 27.0 existed over the last five years. HUD is well Summary. Figure A.4 of Appendix A percent in 1998 and 26.8 percent in 1999. aware of the volatility of mortgage markets summarizes many of the points made in this Freddie Mac’s performance, as measured by and the possible impacts on the GSEs’ ability section regarding opportunities for Fannie HUD, rose from 21.8 percent in 1993 to 26.4 to meet the housing goals. Should conditions Mae and Freddie Mac to improve their percent in 1995, followed by 25.0 percent in change such that the goals are no longer overall performance on the Geographically- 1996, 26.3 percent in 1997, 26.1 percent in reasonable or feasible, the Secretary has the Targeted Goal. The GSEs’ purchases provided 1998, and 27.5 percent in 1999. Last year was authority to revise the goals. financing for 6,507,173 dwelling units, which the only year in which Freddie Mac’s represented 55 percent of the 11,744,804 performance on this goal has exceeded 6. The Geographically-Targeted Areas single-family and multifamily units that were Fannie Mae’s performance. Housing Goal for 2001–03 financed in the conventional conforming While both GSEs improved their There are several reasons that the Secretary market during 1998. However, in the performance in underserved areas during the is increasing the Geographically Targeted underserved areas part of the market, the past six years, they lagged the conforming Areas Goal. First, the present 24 percent goal 1,679,464 units that were financed by GSE primary market in providing single-family level for 1997–2000 and the GSEs’ recent purchases represented only 46 percent of the home loans to distressed neighborhoods. As performance are below the estimated 29–32 3,629,144 dwelling units that were financed discussed in Section D, the GSEs show percent of the primary mortgage market in the market in 1998. Thus, there appears to different patterns of lending—through 1998 accounted for by units in properties located be ample room for the GSEs to increase their Freddie Mac was less likely than Fannie Mae in geographically-targeted areas. Raising the purchases in underserved areas. It is hoped to purchase home loans on properties in low- goal reflects the Secretary’s concern that the that expression of concern in the current income and high-minority neighborhoods. GSEs close the remaining gap between their rulemaking will foster additional effort by During the 1996–98 period, Freddie Mac performance and that of the primary both GSEs to increase their purchases in lagged Fannie Mae, portfolio lenders, and the mortgage market. underserved areas. overall conforming market in providing Second, the single-family-owner mortgage funds to underserved neighborhoods. As market in underserved areas has 7. Conclusions shown in Figure B.3, underserved areas demonstrated remarkable strength over the Having considered the projected mortgage accounted for 20.0 percent of Freddie Mac’s past few years relative to the preceding market serving geographically-targeted areas, 1998 purchases of home loans, compared period. This market had only recently begun economic, housing and demographic with 22.9 percent of Fannie Mae’s purchases, to grow in 1993 and 1994, the latest period conditions for 2001–03, and the GSEs’ recent 26.1 percent of home loans retained in for which data was available when the 1996– performance in purchasing mortgages on depositories’ portfolios, and 24.6 percent of 99 goals were established in December 1995. properties in geographically-targeted areas, the overall conforming market. While But the historically high underserved areas the Secretary has determined that the annual Freddie Mac did not make any progress share of the primary single-family mortgage goal of 31 percent in calendar year 2001 and during the 1993–98 period in reducing the market attained in 1994 has been maintained the years following is feasible. Moreover, the gap between its performance and that of the over the 1995–99 period. The three-average Secretary has considered the GSEs’ ability to
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Performance in the Metropolis,’’ Journal of determined that these goal levels are 11 Since upfront loan fees are frequently Urban Affairs, Volume 11, No. 3, 1989, pp. necessary and appropriate. determined as a percentage of the loan 201–223. amount, lenders are discouraged from 17 Individual loan characteristics include Endnotes to Appendix B making smaller loans in older loan size (economies of scale cause lenders 1 Tracts are excluded from the analysis if neighborhoods, because such loans generate to prefer large loans to small loans) and all median income is suppressed or there are no lower revenue and are less profitable to individual borrower variables included in the owner-occupied 1–4 unit properties. There lenders. HMDA data (the applicant’s income, sex, and are 2,033 such tracts. When reporting denial, 12 Traditional underwriting practices may race). origination, and application rates, tracts are have excluded some lower income families 18 Their neighborhood risk proxies include excluded from the analysis if there are no that are, in fact, creditworthy. Such families median income and house value (inverse purchase or refinance applications. Tracts are tend to pay cash, leaving them without a indicators of risk), percent of households also excluded from the analysis if: (1) Group credit history. In addition, the usual front- receiving welfare, median age of houses, quarters constitute more than 50 percent of end and back-end ratios applied to homeownership rate (an inverse indicator), housing units or (2) there are less than 15 applicants’ housing expenditures and other vacancy rate, and the rent-to-value ratio (an home purchase applications in the tract and on-going costs may be too stringent for lower inverse indicator). A high rent-to-value ratio the tract denial rates equal 0 or 100 percent. income households, who typically pay larger suggests lower expectations of capital gains Excluded tracts account for a small shares of their income for housing (including on properties in the neighborhood. percentage of mortgage applications (1.4 rent and utilities) than higher income 19 Schill and Wachter, page 271. Munnell, percent). These tracts are not excluded from households. et al. reached similar conclusions in their HUD’s underserved areas if they meet the 13 These studies, which were conducted at study of Boston. They found that the race of income and minority thresholds. Rather, the the census tract level, typically involved the individual mattered, but that once tracts are excluded to remove the effects of regressing the number of mortgage individual characteristics were controlled, outliers from the analysis. originations (relative to the number of racial composition of the neighborhood was 2 For the sake of brevity, in the remainder properties in the census tract) on insignificant. of this appendix, the term ‘‘central city’’ is characteristics of the census tract including 20 Fred J. Phillips-Patrick and Clifford V. used to mean ‘‘OMB-designated central city.’’ its minority composition. A negative Rossi, ‘‘Statistical Evidence of Mortgage 3 Alicia H. Munnell, Lynn Browne, James coefficient estimate for the minority Redlining? A Cautionary Tale’’, The Journal McEneaney, and Geoffrey Tootell. 1996. composition variable was often interpreted as of Real Estate Research, Volume 11, Number ‘‘Mortgage Lending in Boston: Interpreting suggesting redlining. For a discussion of 1 (1996), pp.13–23. HMDA Data,’’ American Economic Review, these models, see Eugene Perle, Kathryn 21 Samuel L. Myers, Jr. and Tsze Chan, 86(1) March:25–54. Lynch, and Jeffrey Horner, ‘‘Model ‘‘Racial Discrimination in Housing Markets: 4 Mortgage Lending Discrimination: A Specification and Local Mortgage Market Accounting for Credit Risk’’, Social Science Review of Existing Evidence edited by Behavior,’’ Journal of Housing Research, Quarterly, Volume 76, Number 3 (September Margery A. Turner and Felicity Skidmore, Volume 4, Issue 2, 1993, pp. 225–243. 1995), pp. 543–561. The Urban Institute: Washington, D.C., June 14 For critiques of the early HMDA studies, 22 For another study that uses HMDA data 1999. see Andrew Holmes and Paul Horvitz, on reasons for denial to construct a proxy for 5 Margery A. Turner, Raymond J. Struyk, ‘‘Mortgage Redlining: Race, Risk, and bad credit, see Steven R. Holloway, and John Yinger. Housing Discrimination Demand,’’ The Journal of Finance, Volume ‘‘Exploring the Neighborhood Contingency of Study: Synthesis, Washington, D.C., U.S. 49, No. 1, March 1994, pp. 81–99; and Race Discrimination in Mortgage Lending in Department of Housing and Urban Michael H. Schill and Susan M. Wachter, ‘‘A Columbus, Ohio’’, Annals of the Association Development: 1991. Tale of Two Cities: Racial and Ethnic of American Geographers, 88(2), 1998, pp. 6 Margery A. Turner, ‘‘Discrimination in Geographic Disparities in Home Mortgage 252–276. Holloway finds that mortgage Urban Housing Markets: Lessons from Fair Lending in Boston and Philadelphia,’’ denial rates are higher for black applicants Housing Audits,’’ Housing Policy Debate, Journal of Housing Research, Volume 4, Issue (particularly those who are making large loan Vol. 3, Issue 2, 1992, pp. 185–215. 2, 1993, pp. 245–276. requests) in all-white neighborhoods than in 7 The denial rates in Table B.1 are for home 15 Like early HMDA studies, an analysis of minority neighborhoods, while the reverse is purchase mortgages. Denial rates are several deed transfer data in Boston found lower true for white applicants making small loan percentage points lower for refinance loans rates of mortgage activity in minority requests. than for purchase loans, but denial rates neighborhoods. The discrepancies held even 23 See Geoffrey M. B. Tootell, ‘‘Redlining in follow the same pattern for both types of after controlling for income, house values Boston: Do Mortgage Lenders Discriminate loans: rising with minority concentration and and other economic and non-racial factors Against Neighborhoods?’’, Quarterly Journal falling with increasing income. that might explain differences in demand and of Economics, 111, November, 1996, pp. 8 Alicia H. Munnell, Lynn E. Browne, housing market activity. The study 1049–1079; and ‘‘Discrimination, Redlining, James McEneaney, and Geoffrey M. B. concluded that ‘‘the housing market and the and Private Mortgage Insurance’’, Tootell, ‘‘Mortgage Lending in Boston: credit market together are functioning in a unpublished manuscript, October, 1995. Interpreting HMDA Data,’’ American way that has hurt African American 24 Tootell notes that both omitted variables Economic Review, March 1996. neighborhoods in the city of Boston.’’ and the strong correlation between borrower 9 A HUD study also found mortgage denial Katherine L. Bradbury, Karl E. Case, and race and neighborhood racial composition in rates for minorities to be higher in ten Constance R. Dunham, ‘‘Geographic Patterns segregated cities have made it difficult for metropolitan areas, even after controlling for of Mortgage Lending in Boston, 1982–1987,’’ previous studies to distinguish the impacts of credit risk. In addition, the higher denial New England Economic Review, September/ geographic redlining from the effects of rates observed in minority neighborhoods October 1989, pp. 3–30. individual borrower discrimination. He can were not purely a reflection of the higher 16 Using an analytical approach similar to unravel these effects because he includes a denial rates experienced by minorities. that of Bradbury, Case, and Dunham, Anne direct measure of credit history and because Whites experienced higher denial rates in Shlay found evidence of fewer mortgage over half of minority applicants in the Boston some minority neighborhoods than in some loans originated in black census tracts in Fed data base applied for mortgages in predominantly white neighborhoods. Ann B. Chicago and Baltimore. See Anne Shlay, predominately white areas. Schnare and Stuart A. Gabriel, ‘‘The Role of ‘‘Not in That Neighborhood: The Effects of 25 Stephen L. Ross and Geoffrey M. B. FHA in the Provision of Credit to Population and Housing on the Distribution Tootell, ‘‘Redlining, the Community Minorities,’’ ICF Incorporated, prepared for of Mortgage Finance within the Chicago Reinvestment Act, and Private Mortgage the U.S. Department of Housing and Urban SMSA,’’ Social Science Research, Volume 17, Insurance’’, unpublished manuscript, March, Development, April 25, 1994. No. 2, 1988, pp. 137–163; and ‘‘Financing 1999. 10 William C. Hunter, ‘‘The Cultural Community: Methods for Assessing 26 Lang, William W. and Leonard I. Affinity Hypothesis and Mortgage Lending Residential Credit Disparities, Market Nakamura, ‘‘A Model of Redlining,’’ Journal
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Report to HUD except for 1997 (HUD- Externalities Critical?’’ Journal of Real Estate 37 Avery, et al., page 19, note that, other reported: 28.8 percent/Fannie Mae-reported: Finance and Economics, Volume 13, 1996, things equal, a black applicant for a home 30.0 percent) and 1999 (26.8 percent/26.7 pp. 71–89. purchase loan is 3.7 percent more likely to percent), reflecting minor differences in the 28 Ling, David C. and Susan M. Wachter, have his/her application denied in an all- application of counting rules. ‘‘Information Externalities and Home minority tract than in an all-white tract, 46 The official figures on goal performance Mortgage Underwriting,’’ Journal of Urban while a white applicant from an all-minority shown above for Freddie Mac are identical Economics, Volume 44, 1998, pp. 317–332. tract would be 11.5 percent more likely to be with the corresponding figures presented by 29 Robert B. Avery, Patricia E. Beeson, and denied. Freddie Mac in its Annual Housing Activity Mark S. Sniderman, ‘‘Neighborhood 38 Methodological and econometric Reports to HUD except for 1999 (HUD- Information and Home Mortgage Lending,’’ challenges that researchers will have to deal reported: 27.5 percent/Freddie Mac-reported: Journal of Urban Economics, Volume 45, with are discussed in Mitchell Rachlis and 27.6 percent), reflecting minor differences in 1999, pp. 287–310. Anthony Yezer, ‘‘Serious Flaws in Statistical the application of counting rules. 30 The Preamble to the 1995 Rule provides Tests for Discrimination in Mortgage 47 Underserved areas make up about 56 additional reasons why central city location Markets,’’ Journal of Housing Research, percent of the census tracts in should not be used as a proxy for Volume 4, 1993, pp. 315–336. nonmetropolitan areas and 47 percent of the underserved areas. 39 Mikesell, Jim. Can Federal Policy census tracts in metropolitan areas. This is 31 Federal Register, October 20, 1999, Changes Improve the Performance of Rural one reason why underserved areas comprise ‘‘Office of Management and Budget: Mortgage Markets, Economic Research a larger portion of the GSEs’ single-family Recommendations from the Metropolitan Service, U.S. Department of Agriculture, mortgages in nonmetropolitan areas (38 Area Standards Review Committee to the Issues in Agricultural and Rural Finance. percent) than in metropolitan areas (22 Office of Management and Budget Agriculture Information Bulletin No. 724–12, percent). Concerning Changes to the Standards for August 1998. 48 HMDA provides little useful information Defining Metropolitan Areas.’’ 40 Standard mortgage types are 30-year on rural areas. Therefore, the HMDA data 32 William Shear, James Berkovec, Ann fixed-rate mortgages, 15-year FRMs, and 30- reported here apply only to metropolitan Dougherty, and Frank Nothaft, ‘‘Unmet year adjustable rate mortgages (ARMs). These areas. Housing Needs: The Role of Mortgage are the ones most often traded in the 49 Analysis of application rates are not Markets,’’ Journal of Housing Economics, secondary markets. Nonstandard mortgages reported here. Although application rates are Volume 4 , 1996, pp. 291–306. These generally have shorter terms than the sometimes used as a measure of mortgage researchers regressed the number of mortgage standard mortgages. demand, they provide no additional originations per 100 properties in the census 41 MacDonald, Heather. Fannie Mae and information beyond that provided by looking tract on several independent variables that Freddie Mac in Rural Housing Markets: Does at both denial and origination rates. The were intended to account for some of the Space Matter? Study funded as part of the patterns observed for application rates are demand and supply (i.e., credit risk) 1997 GSE Small Grants by HUD’s Office of still very similar to those observed for influences at the census tract level. The Policy Development and Research. origination rates. tract’s minority composition and central city 42 MacDonald constructs a county-level 50 As shown in Table B.1, no sharp breaks location were included to test if these mortgage market data in rural areas using occur in the denial and origination rates characteristics were associated with information collected by the Department of across the minority and income deciles— underserved neighborhoods after controlling Revenue for counties and states. Annual mostly, the increments are somewhat similar for the demand and supply variables. Sales Ratio Studies conducted by many as one moves across the various deciles that Examples of the demand and supply states’ Department of Revenue provide the account for the major portions of mortgage variables at the census tract level include: number of sales for different property types. activity. tract income relative to the area median This is done by using residential sales 51 The differentials in denial rates are due, income, the increase in house values between recorded for property tax purposes. Other in part, to differing risk characteristics of the 1980 and 1990, the percentage of units county-level variables used to compare rural prospective borrowers in different areas. boarded up, and the age distributions of counties are obtained from the 1990 Census However, use of denial rates is supported by households and housing units. See also of Population and Housing and Bureaus of the findings in the Boston Fed study which Susan Wharton Gates, ‘‘Defining the labor Statistics. Data obtained from Census found that denial rate differentials persist, Underserved,’’ Secondary Mortgage Markets, included county populations, racial even after controlling for risk of the borrower. 1994 Mortgage Market Review Issue, 1995, composition, a variety of housing stock See Section B for a review of that study. 52 pp. 34–48. characteristics like home ownership rates, Although this goal is targeted to lower- 33 For example, census tracts at 80 percent vacancy rates, proportion of owner-occupied income and high-minority areas, it does not of area median income were estimated to mobile homes, median housing value in mean that GSE purchase activity in have 8.6 originations per 100 owners as 1990, median age of the housing stock, underserved areas derives totally from lower compared with 10.8 originations for tracts proportion of units with complete plumbing, income or minority families. In 1999, above- over 120 percent of area median income. and access to infrastructure, e.g., public roads median income households accounted for 50 34 Shear et al., p. 18. and sewage systems. Data collected from the percent of the mortgages that the GSEs 35 See Avery, et al. Bureau of Labor Statistics included purchased in underserved areas. This 36 Avery et al. find very large unadjusted unemployment rates and residential building suggests that these areas are quite diverse. differences in denial rates between white and permits. Appendix C—Departmental 43 minority neighborhoods, and although the The Future of Manufactured Housing, Considerations To Establish the Special gap is greatly reduced by controlling for Harvard University Joint Center for Housing applicant characteristics (such as race and Studies, February 1997. Affordable Housing Goal income) and other census tract characteristics 44 Though future demand for manufactured A. Introduction (such as house price and income level), a housing is promising, the Joint Center notes significant difference between white and some continued obstacles to growth. 1. Establishment of the Goal minority tracts remains (for purchase loans, Challenges for the industry to overcome The Federal Housing Enterprises Financial the denial rate difference falls from an include a lack of standardization of Safety and Soundness Act of 1992 unadjusted level of 16.7 percent to 4.4 installation procedures and product (FHEFSSA) requires the Secretary to percent after controlling for applicant and guarantees, exclusionary zoning laws, and establish a special annual goal designed to other census tract characteristics, and for certain provisions of the national building adjust the purchase by each GSE of mortgages refinance loans, the denial rate difference code. on rental and owner-occupied housing to
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There is merit to the view that 1998 was affordable to, low-income families in low- Instead, they both recommended that the an unusual year in the mortgage markets. income areas and very-low-income families special affordable multifamily subgoal be HUD’s motivation in setting the subgoal (the Special Affordable Housing Goal). established as a percentage of a five-year based on 1998 transactions volume was to In establishing the Special Affordable average of each GSEs’ transactions volume. establish the subgoal in a fair and reasonable Housing Goal, FHEFSSA requires the Freddie Mac commented further that HUD’s manner, given the difference between the two Secretary to consider: proposed subgoal was ‘‘unreasonably high.’’ GSEs in size and capacity. HUD selected a 1. Data submitted to the Secretary in Many other commenters supported the subgoal of one percent of 1998 transactions connection with the Special Affordable multifamily subgoal, although they volume in recognition of the increased Housing Goal for previous years; questioned whether 1998 was the appropriate capacity of the GSEs to conduct multifamily 2. The performance and efforts of the GSEs base year upon which to establish the special affordable lending, as well as the toward achieving the Special Affordable subgoal. Some commenters argued that the need to challenge the GSEs to maintain and Housing Goal in previous years; proposed subgoal was too high, in light of an expand their commitment to this segment of 3. National housing needs of targeted expected decline in multifamily origination the market in a manner feasible and families; volume. Others argued that the subgoal was consistent with safety and soundness. Now 4. The ability of the GSEs to lead the too low, based on the needs of very low- and that more recent data are available, it is industry in making mortgage credit available low-income families and families in rural apparent that establishing the subgoal in a for low-income and very-low-income areas. Comments were received from some manner taking 1999 mortgage volume into families; and who felt the subgoal should be percentage- consideration, along with that of 1997 and 5. The need to maintain the sound based and move from year to year. Still other 1998, more accurately corresponds to the financial condition of the enterprises. commenters felt that the multifamily subgoal relative size and respective capabilities of the should be eliminated, as it no longer GSEs over the 2001–2003 goals period than 2. The Goal appeared to serve a purpose, particularly would a subgoal established on the basis of The final rule provides that the Special since Freddie Mac had re-entered the 1998 volume alone. Accordingly, the final Affordable Housing Goal is 20 percent in multifamily market. rule establishes the special affordable 2001–2003. Of the total Special Affordable From its inception, the multifamily subgoal multifamily subgoal at the respective average Housing Goal for each year, each GSE must has been viewed as a means for expanding of one percent of each GSEs’ combined purchase multifamily mortgages in an and maintaining Freddie Mac’s presence in (single-family and multifamily) mortgage amount at least equal to one percent of the the multifamily mortgage market. Both the purchases over 1997–1999, resulting in GSE’s combined (single-family and multifamily mortgage market and Freddie subgoals somewhat lower than those in the multifamily) annual average mortgage Mac’s multifamily transactions volume have proposed rule, but with the advantages of (i) purchases over 1997–1999. grown significantly during the 1990s, being based on more recent and complete Approximately 23–26 percent of the indicating both increased opportunity and information regarding the differential size conventional conforming mortgage market in capacity to grow by Freddie Mac. While and resource capabilities of each GSE, and 2001–03 would qualify under the Special Freddie Mac continues to lag behind Fannie (ii) taking into consideration new Affordable Housing Goal as defined in the Mae somewhat in its multifamily volume, it information regarding multifamily final rule, as projected by HUD. appears to be within reach of catching up conventional origination volume. This Units that count toward the goal: Subject with its larger competitor with regard to the implies the following thresholds for the two to further provisions discussed in the multifamily proportion of total purchases. In GSEs: 1 Preamble to this final rule regarding seasoned 1999, Fannie Mae’s multifamily mortgage loans, units that count toward the Special purchases were 9.5 percent of its total 2001±2003 Affordable Housing Goal include units mortgage purchases and Freddie Mac’s (in billions) occupied by low-income owners and renters multifamily mortgage purchases were 8.3 in low-income areas, and very low-income percent of its total mortgage purchases. Fannie Mae ...... $2.85 owners and renters. Other low-income rental Freddie Mac’s multifamily special Freddie Mac ...... $2.11 units in multifamily properties count toward affordable transactions volume was $2.7 the goal where at least 20 percent of the units billion in 1998 and $2.3 billion in 1999, 2. Multifamily Subgoal Alternatives in the property are affordable to families showing that Freddie Mac does have the In the proposed rule, HUD identified three whose incomes are 50 percent of area median capacity to generate significant multifamily income or less, or where at least 40 percent alternative approaches for specifying special affordable transactions volume in a multifamily subgoals for the GSEs based on of the units are affordable to families whose favorable market environment. At the same incomes are 60 percent of area median a (i) minimum number of units; (ii) minimum time, however, the Department is mindful of income or less. percentage of multifamily acquisition the fact that multifamily market conditions volume; and (iii) minimum number of B. Summary and Response to Comments experienced during 1998–1999 may not be mortgages acquired. While some of these representative of future years. Because of proposals did receive support from 1. Multifamily Subgoal Level extensive multifamily refinancing during commenters, HUD does not see any HUD’s proposed rule would have set the 1998–1999, in particular, in conjunction with compelling reason to alter the dollar-based multifamily subgoal at 0.9 percent of the the widespread use of ‘‘lockout’’ provisions structure of the multifamily subgoal as dollar volume of combined (single-family which place significant limitations on established in the 1995 rule, which can be and multifamily) 1998 mortgage purchases in borrower’s right to refinance recently updated and adapted to the current market calendar year 2000, and 1.0 percent in each originated loans, HUD expects conventional environment by basing it upon recent of calendar years 2001–2003. This would multifamily origination volume in 2001–2003 acquisition volume. It is noteworthy that the have implied the following thresholds for the to be somewhat lower than the levels reached Special Affordable Housing Goal, as a two GSEs: during 1998–1999. Based on partial-year percentage-of-business goal based on number information collected by the Department on of units financed, combines elements of 2000 2001±2003 GSE and CMBS multifamily transactions options (i) and (iii). HUD’s decision to award (in billions) (in billions) volume during 2000, it appears that bonus points toward the housing goals for origination volume will be somewhat lower GSE transactions involving small multifamily Fannie Mae $3.31 $3.68 this year than in 1999. Taking into properties with 5–50 units will achieve some Freddie consideration new information and data not of the intended policy objectives associated Mac ...... 2.46 2.73 available at the time HUD published its with option (iii). proposed GSE rule in March of 2000, the Both GSEs opposed establishing the special Department has determined that a modest 3. Temporary Adjustment Factor affordable multifamily subgoal as a reduction in multifamily special affordable In the proposed rule, HUD noted that percentage of their 1998 transaction volume, goal thresholds relative to those in the Freddie Mac’s presence in the multifamily stating that 1998 was in some respects an proposed rule is reasonable and appropriate. market has lagged far behind that in single-
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Data Submitted to the Secretary in the end of 1999, $16.8 billion, are much In its comments, Freddie Mac supported Connection With the Special Affordable smaller than that Fannie Mae’s $47.4 billion, the idea of a temporary adjustment factor; Housing Goal for Previous Years, and the not only in absolute terms, but also a however, Freddie Mac recommended that it Performance and Efforts of the Enterprises percentage of all mortgage holdings and be set at 1.35 instead of the 1.2 level Toward Achieving the Special Affordable guarantees. Freddie Mac’s multifamily proposed by HUD. According to Freddie Housing Goal in Previous Years holdings and guarantees are 2.1 percent of its Mac, the difference in size and age between total, compared with 4.3 percent for Fannie Freddie Mac’s and Fannie Mae’s multifamily The discussions of these two factors have 2 Mae. Freddie Mac’s smaller multifamily portfolios makes goal achievement easier for been combined because they overlap to a portfolio relative to that of Fannie Mae has Fannie Mae. Freddie Mac also recommended significant degree. meant fewer refinance opportunities from that the temporary adjustment factor apply to within its portfolio, reducing anticipated a. GSE Performance Relative to the 1996–99 all three goals and opposed any phasing out multifamily transactions volume. Goals of the factor over the three-year goals period. Because of the importance of multifamily This section discusses each GSE’s In the period since HUD’s interim housing mortgages to GSE performance on the Special performance under the Special Affordable goals took effect in January 1993, Freddie Affordable Housing Goal, Fannie Mae’s larger Housing Goal over the 1993–99 period. The Mac’s multifamily transactions volume has multifamily portfolio confers a significant data presented here are ‘‘official results’’— expanded rapidly, as noted above. Freddie advantage with regard to goals performance. i.e., they are based on HUD’s in-depth Mac’s 1999 multifamily transactions volume For example, in 1999, 56.0 percent of units analysis of the loan-level data submitted was $7.6 billion, compared with only $191 backing Fannie Mae’s multifamily annually to the Department and the counting million in 1993. HUD’s analysis indicates transactions met the special affordable goal, provisions contained in HUD’s regulations in that a Temporary Adjustment Factor of 1.2 is representing 31.3 percent of units meeting 24 CFR part 81, subpart B. As explained sufficient to provide ‘‘regulatory parity’’ the special affordable goal, when multifamily below, in some cases these ‘‘official results’’ consistent with the direction provided by the units represented only 9.5 percent of total differ from goal performance reported to the Conference Report addressing this issue. The purchase volume. In contrast, only 13.4 Department by the GSEs in their Annual Department has, therefore, decided to percent of Fannie Mae’s single-family owner- Housing Activities Reports. implement the temporary adjustment factor occupied units met the special affordable HUD’s goals specified that in 1996 at least 3 as proposed in the proposed rule. The goal. 12 percent of the number of units eligible to Adjustment Factor of 1.2 will be applied to In recognition of the implications for count toward the Special Affordable goal the Low- and Moderate-Income and Special housing goals performance of differences in should qualify as Special Affordable, and at Affordable Goals. The Temporary the relative size of multifamily portfolios least 14 percent annually beginning in 1997. Adjustment Factor would terminate between the two GSEs, the Conference Report The actual performance in 1996 through December 31, 2003. The Temporary on HUD’s appropriations for 2000 provides 1999, based on HUD’s analysis of loan-level the following guidance: ‘‘* * * the stretch Adjustment Factor will not apply to Fannie data submitted by the GSEs, is shown in affordable housing efforts required of each of Mae. Table C.1 and Figure C.1. Fannie Mae Freddie Mac and Fannie Mae should be 4. Seasoned Mortgage Loan Purchases surpassed the goal by 3.4 percentage points equal, so that both enterprises are similarly ‘‘Recycling’’ Requirement and 3.0 percentage points, respectively, in challenged in attaining the goals. This will 1996 and 1997, while Freddie Mac surpassed require the Secretary to recognize the present Comments submitted in response to HUD’s composition of each enterprise’s overall proposed rule regarding ‘‘recycling the goal by 2.0 and 1.2 percentage points. In portfolio in order to ensure regulatory parity requirements’’ pertaining to seasoned loans 1998, Fannie Mae exceeded the goal by 0.3 in the application of regulatory guidelines are discussed in the Preamble, as are the percentage point, while Freddie Mac measuring goal compliance.’’ 4 Department’s determinations regarding this exceeded the goal by 1.9 percentage points. In order to overcome any lingering effects matter. Both GSEs stepped up their performance of Freddie Mac’s decision to leave the and attained their highest performance to C. Consideration of the Factors multifamily market in the early 1990s, and to date in 1999, with Fannie Mae surpassing the provide an incentive to continue the rapid In considering the factors under FHEFSSA 14 percent goal by 3.6 percentage points and expansion of its multifamily presence since to establish the Special Affordable Housing Freddie Mac surpassing the goal by 3.2 then, the Department proposed a ‘‘Temporary Goal, HUD relied upon data gathered from percentage points (Table C.1). After lagging Adjustment Factor’’ for Freddie Mac’s the American Housing Survey through 1997, Freddie Mac on special affordable multifamily mortgage purchases for purposes the Census Bureau’s 1991 Residential performance in 1998, Fannie Mae surpassed of calculating performance on the Low- and Finance Survey, the 1990 Census of Freddie Mac last year.5 A major reason for Moderate-Income Housing Goal and the Population and Housing, Home Mortgage Fannie Mae’s record special affordable goal Special Affordable Housing Goal. In Disclosure Act (HMDA) data for 1992 performance in 1999 was the 15 percent determining Freddie Mac’s performance for through 1998, and annual loan-level data increase in the dollar volume of its special each of these two goals, each unit in a from the GSEs on their mortgage purchases affordable multifamily purchases; Freddie property with more than 50 units meeting through 1999. Appendix D discusses in detail Mac, on the other hand, experienced a 16 one or both of these two housing goals would how these data resources were used and how percent decline in such purchases between be counted as 1.2 units in calculating the the size of the conventional conforming 1998 and 1999.6 numerator of the respective housing goal market for this goal was estimated. BILLING CODE 4210±27±P
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Table C.1 also includes, for comparison exhibited downward trends for both GSEs. In 15.5 percent). Third, in 1999, Freddie Mac purposes, comparable figures for 1993 1999 Fannie Mae’s single-family owner units matched Fannie Mae in purchasing special through 1995, calculated according to the qualifying for the goal represented 54.8 affordable home loans. Special affordable counting conventions of the 1995 rule that percent of all qualifying units, and Fannie loans accounted for 12.5 percent of Freddie became applicable in 1996. Each GSE’s Mae’s single-family rental units were 13.9 Mac’s 1999 home purchase mortgages, and performance in 1996 through 1999 exceeded percent of all qualifying units. In 1999 for 12.3 percent of Fannie Mae’s purchases. its performance in each of the three Freddie Mac’s single-family owner units With respect to the GSEs’ total (combined preceding years. qualifying for the goal represented 62.0 home purchase and refinance) loans, Freddie The Fannie Mae figures presented above percent of all qualifying units, and Freddie Mac’s performance in 1999 surpassed Fannie are smaller than the corresponding figures Mac’s single-family rental units were 16.3 Mae’s performance. The special affordable presented by Fannie Mae in its Annual percent of all qualifying units. Housing Activity Reports to HUD by Reliance on household income relative to category accounted for 13.3 percent of approximately 2 percentage points in both area income characteristics to meet goal. Freddie Mac’s 1999 purchases, compared 1996 and 1997, 1.3 percentage points in Tables C.2 and C.3 also show the allocation with 12.3 percent of Fannie Mae’s purchases. 1998, and 1.1 percentage points in 1999. The of units qualifying for the goal as related to Section G in Appendix A discusses the role difference largely reflects HUD-Fannie Mae the family income and area median income of the GSEs both in the overall special differences in application of counting rules criteria in the goal definition. Very-low- affordable market and in the different relating to counting of seasoned loans for income families (shown in the two leftmost segments (single-family owner, single-family purposes of this goal. In particular, HUD’s columns in the tables) accounted for 85.2 rental, and multifamily rental) of the special tabulations reflect inclusion of seasoned loan percent of Fannie Mae’s units qualifying affordable market. The GSEs’ special purchases in the denominator in calculating under the goal in 1999, compared to 80.2 affordable purchases have accounted for 25 performance under the Special Affordable percent in 1993. For Freddie Mac, very-low- percent of all special affordable owner and goal, as discussed in Preamble section income families accounted for 84.9 percent of rental units that were financed in the II(B)(6)(c) on the Seasoned Mortgage Loan units qualifying under the goal in 1999 and conventional conforming market during Purchases ‘‘Recycling’’ Requirement. Freddie 80.3 percent in 1993. In contrast, mortgage 1997. The GSEs’ 25-percent share of the Mac’s Annual Housing Activity Report purchases from low-income areas (shown in special affordable market was three-fifths of figures for this goal differ from the figures the first and third columns in the tables) their 40-percent share of the overall market. presented above by 0.1 percentage point, accounted for 32.0 percent of Fannie Mae’s Even in the owner market, where the GSEs reflecting minor differences in application of units qualifying under the goal in 1999, account for 50 percent of the market, their counting rules. compared to 36.8 percent in 1993. The share of the special affordable market was Since 1996 each GSE has been subject to corresponding percentages for Freddie Mac only 36 percent. Similar patterns prevailed in an annual subgoal for multifamily Special were 33.7 percent in 1999 and 36.3 percent 1998. This analysis suggests that the GSEs are Affordable mortgage purchases, as discussed in 1993. Thus given the definition of special above, established as 0.8 percent of the dollar affordable housing in terms of household and not leading the single-family market in volume of single-family and multifamily area income characteristics, both GSEs have purchasing loans that qualify for the Special mortgages purchased by the respective GSE consistently relied substantially more on Affordable Goal. There is room for the GSEs in 1994. Fannie Mae’s subgoal was $1.29 low-income characteristics of households to improve their performance in purchasing billion and Freddie Mac’s subgoal was $988 than low-income characteristics of census affordable loans at the lower-income end of million for each year. Fannie Mae surpassed tracts to meet this goal. the market. the subgoal by $1.08 billion, $1.90 billion, c. GSEs’ Performance Relative to Market 3. National Housing Needs of Low-Income $2.24 billion, and $2.77 billion in 1996, 1997, Families in Low-Income Areas and Very- Section E in Appendix A used HMDA data 1998, and 1999, respectively, while Freddie Low-Income Families Mac exceeded the subgoal by $18 million, and GSE loan-level data for home purchase $220 million, $1.70 billion, and $1.27 billion. mortgages on single-family owner-occupied This discussion concentrates on very low- Table C.1 includes figures on subgoal properties in metropolitan areas to compare income families with the greatest needs. It performance, and they are depicted the GSEs’ performance in special affordable complements Section C of Appendix A, graphically in Figure C.2. lending to the performance of depositories which presents detailed analyses of housing and other lenders in the conventional problems and demographic trends for lower- b. Characteristics of Special Affordable conforming market. There were three main income families which are relevant to the Purchases findings. First, both GSEs lag depositories issue addressed in this part of Appendix C. The following analysis presents and the overall market in providing mortgage Data from the American Housing Survey information on the composition of the GSEs’ funds for very low-income and other special demonstrate that housing problems and Special Affordable purchases according to affordable borrowers. Second, the needs for affordable housing continue to be area income, unit affordability, tenure of unit performance of Freddie Mac through 1998 more pressing in the lowest-income and property type (single- or multifamily). was particularly weak compared to Fannie categories than among moderate-income Increased reliance on multifamily housing Mae, the depositories, and the overall market. families, as established in HUD’s analysis for to meet goal. Tables C.2 and C.3 show that For example, between 1996 and 1998, special the 1995 rule. Table C.4 displays figures on both GSEs have increasingly relied on affordable borrowers accounted for 9.8 several types of housing problems—high multifamily housing units to meet the special percent of the home loans purchased by housing costs relative to income, physical affordable goal since 1993. Fannie Mae’s Freddie Mac, 11.9 percent of Fannie Mae’s housing defects, and crowding—for both multifamily purchases represented 31.3 purchases, 16.7 percent of home loans owners and renters. Figures are presented for percent of all purchases qualifying for the originated and retained by depositories, and goal in 1999, compared with 28.1 percent in 15.3 percent of all home loans originated in households experiencing multiple (two or 1993. Freddie Mac’s multifamily purchases the conventional conforming market (see more) of these problems as well as represented 21.6 percent of all purchases Table A.3 in Appendix A). While Freddie households experiencing a severe degree of qualifying for the goal in 1999, compared to Mac improved its performance, it had not either cost burden or physical problems. 5.5 percent in 1993. The trends for both GSEs closed the gap between its performance and Housing problems in 1995 were much more were steadily upward throughout the 1993– that of the overall market. In 1992, special frequent for the lowest-income groups.7 97 period, with some decrease in multifamily affordable loans accounted for 6.5 percent of Incidence of problems is shown for share of the special affordable purchases Freddie Mac’s purchases and 10.4 percent of households in the income range covered by since 1997. market originations, for a ‘‘Freddie-Mac-to- the special affordable goal, as well as for The other two housing categories—single- market’’ ratio of 0.63. By 1998, that ratio had higher income households. family owner and single-family rental—both increased only to 0.73 (11.3 percent versus BILLING CODE 4210±27±P
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This analysis shows that priority problems moderate-income loans and (b) the financial market where housing needs are greatest. The of severe cost burden or severely inadequate safety and soundness implications of the bulk of the GSEs’ low- and moderate-income housing are noticeably concentrated among housing goals. Based on this economic mortgage purchases are for the higher-income renters and owners with incomes below 60 analysis and discussions with the Office of portion of this category. The lowest-income percent of area median income (31.5 percent Federal Housing Enterprise Oversight, HUD borrowers account for approximately one- of renter households and 23.8 percent of concludes that the housing goals in this final fourth of each GSE’s below-median income owner households). In contrast, 3.5 percent rule raise minimal, if any, safety and purchases of owner-occupied mortgages. of renter households and 7.1 percent of soundness concerns. owner households with incomes above 60 b. Single-Family Market Comparisons in D. Determination of the Goal percent of area median income, up to 80 Metropolitan Areas percent of area median income, had priority Several considerations, many of which are Section C compared the GSEs’ performance problems. For more than two-thirds of the reviewed in Appendixes A and B and in in special affordable lending to the very low-income renter families with worst previous sections of this Appendix, led to the performance of depositories and other case problems, the only problem was determination of the Special Affordable lenders in the conventional conforming affordability—they did not have problems Housing Goal. market for single-family home loans. The with housing adequacy or crowding. 1. Severe Housing Problems analysis showed that both GSEs lag depositories and the overall market in 4. The Ability of the Enterprises To Lead the The data presented in Section C.3 Industry in Making Mortgage Credit providing mortgage funds for very low- demonstrate that housing problems and income and other special affordable Available for Low-Income and Very Low- needs for affordable housing are much more borrowers. Figure C.3 illustrates these Income Families pressing in the lowest-income categories than findings. In 1998, special affordable among moderate-income families. The high The discussion of the ability of Fannie Mae borrowers accounted for 11.3 percent of the incidence of severe problems among the and Freddie Mac to lead the industry in home loans purchased by Freddie Mac, 13.2 Section G.5 of Appendix A is relevant to this lowest-income renters reflects severe percent of Fannie Mae’s purchases, 17.7 factor—the GSEs’ roles in the owner and shortages of units affordable to those renters. percent of home loans originated and rental markets, their role in establishing At incomes below 60 percent of area median, retained by depositories, and 15.5 percent of widely-applied underwriting standards, their 34.7 percent of renters and 21.6 percent of all home loans originated in the conventional role in the development of new technology owners paid more than 50 percent of their conforming market. Section C also noted that for mortgage origination, their strong staff income for housing. In this same income resources, and their financial strength. range, 65.6 percent of renters and 42.4 Freddie Mac improved its performance, but Additional analyses of the potential ability of percent of owners paid more than 30 percent it had not made much progress in closing the the enterprises to lead the industry in the of their income for housing. In addition, 31.5 gap between its performance and that of the low- and very low-income market appears percent of renters and 23.8 percent of owners overall market. In 1999, however, Freddie below—in Section D.2 generally, and in exhibited ‘‘priority problems’’, meaning Mac’s funding of special affordable loans Section D.3 with respect to multifamily housing costs over 50 percent of income or improved to the point that it matched Fannie housing. severely inadequate housing. Mae’s performance with respect to purchases of home loans (12.5 percent and 12.3 percent, 5. The Need To Maintain the Sound 2. GSE Performance and the Market respectively) and it surpassed Fannie Mae’s Financial Condition of the GSEs a. GSEs’ Single-Family Performance performance with respect to purchases of HUD has undertaken a separate, detailed The Special Affordable Housing Goal is total combined home purchases and economic analysis of this final rule, which designed, in part, to ensure that the GSEs refinance loans (13.3 percent and 12.3 includes consideration of (a) the financial maintain a consistent focus on serving the percent, respectively). returns that the GSEs earn on low- and very low-income portion of the housing BILLING CODE 4210±27±P
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BILLING CODE 4210±27±C affordable market. The GSEs’ purchases have units that were financed in the conventional c. Overall Market Comparisons provided financing for 2,948,112 dwelling conforming market during 1997. However, in units, which represented 40 percent of the Section C compared the GSEs’ role in the the special affordable part of the market, the 7,306,950 single-family and multifamily overall market with their role in the special 519,371 units that were financed by GSE
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Thus, there appears to ample room for presence is enhanced by virtue of the fact serving very-low-income families and low- the GSEs to improve their performance in the that an increasing proportion of multifamily income families in low-income areas. special affordable market. mortgages are originated to secondary market Moreover, HUD has considered the GSEs’ standards. ability to lead the industry as well as their 3. Reasons for Increasing the Special Despite the expanded presence of the GSEs financial condition. HUD has determined Affordable Housing Goal in the multifamily mortgage market and the that a Special Affordable Housing Goal of 20 The reasons the Secretary is increasing the rapid growth in multifamily securitization by percent in 2001–2003 is both necessary and Special Affordable Goal are essentially the means of CMBS, increased secondary market achievable. HUD has also determined that a same as those given in Section H.4 of liquidity does not appear to have benefited multifamily special affordable subgoal for Appendix A for the Low- and Moderate- all segments of the market equally. Small 2001–2003 set at one percent of the average Income Goal. Although that discussion will properties with 5–50 units appear to have of each GSE’s respective dollar volume of not be repeated here, the main considerations been adversely affected by excessive combined (single-family and multifamily) are the following: Freddie Mac’s re-entry into borrowing costs as described in Appendix A. 1997–1999 mortgage purchases in is both the multifamily market; the underlying Another market segment that appears necessary and achievable. strength of the primary mortgage market for experiencing difficulty in obtaining mortgage Endnotes to Appendix C lower-income families; the need for the GSEs credit consists of multifamily properties with to improve their purchases of mortgages for significant rehabilitation needs. Properties 1 HUD has determined that the total dollar lower-income families and their that are more than 10 years old are typically volume of the GSEs’ combined (single and communities; the existence of several low- classified as ‘‘C’’ or ‘‘D’’ properties, and are multifamily) mortgage purchases by Fannie income market segments that would benefit considered less attractive than newer Mae was $165.3 billion in 1997, $367.6 from more active efforts by the GSEs; and the properties by many lenders and investors. billion 1998, and $323.0 in 1999. Freddie substantial profits and financial capacity of Context. As discussed above, in the 1995 Mac’s corresponding acquisition volume was Fannie Mae and Freddie Mac. The Final Rule, the multifamily subgoal for the $117.7 billion in 1997, $273.2 billion in Department’s analysis shows that the GSEs 1996–1999 period was set at 0.8 percent of 1998, and $240.7 billion in 1999. are not leading the market in purchasing the dollar value of each GSEs’ respective 2 Federal Reserve Bulletin, June 2000, A 35. 3 loans that qualify for the Special Affordable 1994 origination volume, or $998 million for Source: HUD analysis of GSE loan-level Goal. There are also plenty of opportunities Freddie Mac and $1.29 billion for Fannie data. 4 for the GSEs to improve their performance in Mae. Freddie Mac exceeded the goal by a U.S. House of Representatives, purchasing special affordable loans. The narrow margin in 1996 and more comfortably Congressional Record. (October 13, 1999), p. GSEs’ accounted for only 25 percent of the in 1997–1999. Fannie Mae has exceeded the H10014. 5 special affordable market in 1997—a figure goal by a wide margin in all four years. It should be noted that in all years, substantially below their 40-percent share of The experience of the 1996–1999 period Fannie Mae’s performance on the special the overall market. Similarly, the GSEs suggests the following preliminary findings affordable goal under HUD scoring lags accounted for only 33 percent of the special regarding the multifamily special affordable performance as reported by Fannie Mae, affordable market in 1998, compared with subgoal: because of differences pertaining to the their 55-percent share of the overall market • The goal has contributed toward a ‘‘recycling’’ of proceeds from the sales of portfolios of special affordable loans. during that heavy refinance year. significantly increased presence by Freddie 6 Mac in the multifamily market. Total dollar volume of multifamily 4. Multifamily Purchases—Further Analysis • The current goal is out of date, as it is purchases moved in the opposite direction As noted previously, the multifamily sector based on market conditions in 1993–94. The from special affordable multifamily volume is especially important in the establishment goal has remained at a fixed level, despite last year—total volume fell by 25 percent for of the special affordable housing goals for significant growth in the multifamily market Fannie Mae (from $12.50 billion in 1998 to Fannie Mae and Freddie Mac because of the and in the GSEs’ administrative capabilities $9.39 billion in 1999), but rose by 16 percent relatively high percentage of multifamily with regard to multifamily. for Freddie Mac (from $6.58 billion in 1998 units meeting the special affordable goal as As mentioned previously, HUD’s final rule to $7.62 billion in 1999); special affordable compared with single-family. For example, in establishes the multifamily subgoal at the multifamily volume rose by 15 percent for 1999, 56.0 percent of units backing Fannie respective average of one percent of each Fannie Mae (from $3.53 billion in 1998 to Mae’s multifamily transactions met the GSEs’ combined mortgage purchases over $4.06 billion in 1999), but fell by 16 percent special affordable goal, representing 31.3 1997–1999. This implies the following for Freddie Mac (from $2.69 billion in 1998 percent of units meeting the special to $2.26 billion in 1999). thresholds for the two GSEs: 7 affordable goal, when multifamily units Tabulations of the 1995 American Housing Survey by HUD’s Office of Policy represented only 9.5 percent of total 2001±2003 purchase volume.8 (in billions) Development and Research. The results in Significant new developments in the the table categorize renters reporting housing multifamily mortgage market have occurred Fannie Mae ...... $2.85 assistance as having no housing problems. 8 since the publication of the December 1995 Freddie Mac ...... 2.11 Source: HUD analysis of GSE loan-level rule, most notably the increased rate of debt data. securitization via Commercial Mortgage A multifamily subgoal for 2001–2003 set at Appendix D—Estimating the Size of the Backed Securities (CMBS) and a higher level one percent of each GSEs’ combined Conventional Conforming Market for of equity securitization by Real Estate mortgage purchases over 1997–1999 will Each Housing Goal Investment Trusts (REITs). Fannie Mae has sustain and likely increase the efforts of the played a role in establishing underwriting GSEs in the multifamily mortgage market, A. Introduction standards that have been widely emulated in with particular emphasis upon the special the growth of the CMBS market. Freddie Mac affordable segment. 1. Overview of Appendix D has contributed to the growth and stability of In establishing the three housing goals, the the CMBS sector by acting as an investor. 5. Conclusion Secretary is required to assess, among a Increased securitization of debt and equity HUD has determined that the Special number of factors, the size of the interests in multifamily property present the Affordable Housing Goal in this final rule conventional market for each goal. This GSEs with new challenges as well as new addresses national housing needs within the appendix explains HUD’s methodology for opportunities. The GSEs are currently income categories specified for this goal, estimating the size of the conventional experiencing a higher degree of secondary while accounting for the GSEs’ past market for each of the three housing goals. market competition than they did in 1995. At performance in purchasing mortgages Following this overview, the remainder of the same time, recent volatility in the CMBS meeting the needs of very-low-income Section A summarizes the main components
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Three-Step Procedure and criticisms of, HUD’s market share 1999 were not released until August 2000, methodology, as well HUD’s response to which did not give HUD enough time to Ideally, computing the low- and moderate- those comments and criticisms. More incorporate that data into the analyses income market share would be detailed analyses of selected comments by reported in the Appendices. It should also be straightforward, consisting of three steps: the GSEs are provided throughout this noted that the discussion sometimes focuses (Step 1) Projecting the market shares of the appendix. Sections C and D discuss two on the year 1997, as 1997 represents a more four major property types included in the particularly important market parameters, the typical mortgage market than the heavy conventional conforming mortgage market: size of the multifamily market and the share refinancing year of 1998. (a) Single-family owner-occupied dwelling of the single-family mortgage market units (SF–O units); accounted for by single-family rental 2. Overview of HUD’s Market Share 3 (b) Rental units in 2–4 unit properties properties. Section E provides a more Methodology where the owner occupies one unit (SF 2–4 systematic presentation of the model’s a. Definition of Market Share units); 6 equations and main assumptions. Sections F, The size of the market for each housing (c) Rental units in one-to-four unit G, and H report HUD’s estimates for the Low- goal is one of the factors that the Secretary and Moderate-Income Goal, the investor-owned properties (SF Investor is required to consider when setting the level Geographically-Targeted (Underserved Areas) units); and, of each housing goal. 4 Using the Low- and Goal, and the Special Affordable Housing (d) Rental units in multifamily (5 or more Moderate-Income Housing Goal as an Goal, respectively.1 units) properties (MF units).7 example, the market share in a particular In developing this rule, HUD has carefully (Step 2) Projecting the ‘‘goal percentage’’ year is defined as follows: reviewed existing information on mortgage for each of the above four property types (for activity in order to understand the weakness Low- and Moderate-Income Share of example, the ‘‘Low- and Moderate-Income of various data sources and has conducted Market: The number of dwelling units Goal percentage for single-family owner- sensitivity analyses to show the effects of financed by the primary mortgage market in occupied properties’’ is the percentage of alternative parameter assumptions. Data on a particular calendar year that are occupied those dwelling units financed by mortgages the multifamily mortgage market from HUD’s by (or affordable to, in the case of rental in a particular year that are occupied by Property Owners and Managers’ Survey units) families with incomes equal to or less households with incomes below the area (POMS), not available at the time 1995 GSE than the area median income divided by the median). total number of dwelling units financed in final rule was published, is utilized here. (Step 3) Multiplying the four percentages the conforming conventional primary HUD is well aware of uncertainties with in (2) by their corresponding market shares mortgage market. some of the data and much of this appendix in (1), and summing the results to arrive at is spent discussing the effects of alternative There are three important aspects to this an estimate of the overall share of dwelling assumptions about data parameters and definition. First, the market is defined in units financed by mortgages that are presenting the results of an extensive set of terms of ‘‘dwelling units’’ rather than, for occupied by low- and moderate-income sensitivity analyses. example, ‘‘value of mortgages’’ or ‘‘number of families. properties.’’ Second, the units are ‘‘financed’’ In a critique of HUD’s market share model, The four property types are analyzed Blackley and Follain (1995, 1996) concluded units rather than the entire stock of all separately because of their differences in that conceptually HUD had chosen a mortgaged dwelling units; that is, the market- low- and moderate-income occupancy. reasonable approach to determining the size share concept is based on the mortgage flow Rental properties have substantially higher of the mortgage market that qualifies for each in a particular year, which will be smaller percentages of low- and moderate-income of the three housing goals.2 Blackley and than total outstanding mortgage debt. Third, Follain correctly note that the challenge lies the low- and moderate-income market is occupants than owner-occupied properties. in getting accurate estimates of the model’s expressed relative to the overall conforming This can be seen in the top portion of Table parameters. As noted later, both GSEs conventional market, which is the relevant D.1, which illustrates Step 3’s basic formula reached the same conclusion in their market for the GSEs.5 The low- and for calculating the size of the low- and comments on the proposed rule. moderate-income market is defined as a moderate-income market. 8 In this example, This appendix reviews in some detail percentage of the conforming market; this low- and moderate-income dwelling units are HUD’s efforts to combine information from percentage approach maintains consistency estimated to account for 53.9 percent of the several mortgage market data bases to obtain with the method for computing each GSE’s total number of dwelling units financed in reasonable values for the model’s parameters. performance under the Low- and Moderate- the conforming mortgage market. Numerous sensitivity analyses are performed Income Goal (that is, the number of low- and BILLING CODE 4210±27±P
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BILLING CODE 4210±27±C Lending Activity (SMLA), Property Owners multifamily mortgage market turned out to be To examine the other housing goals, the and Managers Survey (POMS) and the one of the most controversial issues raised ‘‘goal percentages’’ in Step 2 would be Census Bureau’s Residential Finance Survey during the 1995 rule-making process and as changed and the new ‘‘goal percentages’’ (RFS). In addition, information on the noted in Section B below, an issue that the would be multiplied by Step 1’s property mortgage market was obtained from the GSEs focussed on in their comments on this distribution, which remains constant. For Mortgage Bankers Association, Fannie Mae, year’s proposed rule. In 1997, HMDA example, the Geographically-Targeted Goal 9 Freddie Mac and other organizations. reported about $20.0 billion in multifamily would be derived as illustrated in the bottom Property Shares. To derive the property originations while the SMLA reported more portion of Table D.1. In this example, units shares, HUD started with forecasts of single- than double that amount ($47.9 billion). eligible under the Underserved Areas Goal family mortgage originations (expressed in Because most renters qualify under the Low- are estimated to account for 31.4 percent of dollars). These forecasts, which are available and Moderate-Income Goal, the chosen the total number of dwelling units financed from the GSEs and industry groups such as market size for multifamily can have a in the conforming mortgage market. the Mortgage Bankers Association, do not substantial effect on the overall estimate of provide information on conforming the low- and moderate-income market (as c. Data Issues mortgages, on owner versus renter mortgages, well as on the estimate of the special Unfortunately, complete and consistent or on the number of units financed. Thus, to affordable market). Thus, it is important to mortgage data are not readily available for estimate the number of single-family units consider estimates of the size of the carrying out the above three steps. A single financed in the conforming conventional multifamily market in some detail, as Section data set for calculating either the property market, HUD had to project certain market C does. In addition, given the uncertainty shares or the housing goal percentages does parameters based on its judgment about the surrounding estimates of the multifamily not exist. However, there are several major reliability of different data sources. Sections mortgage market, it is important to consider data bases that provide a wealth of useful D and E report HUD’s findings related to the a range of market estimates, as Sections G– information on the mortgage market. HUD single-family market. H do. combined information from the following Total market originations are obtained by Goal Percentages. To derive the goal sources: the Home Mortgage Disclosure Act adding multifamily originations to the single- percentages for each property type, HUD (HMDA) reports, the American Housing family estimate. Because of the wide range of relied heavily on HMDA, AHS, and POMS Survey (AHS), HUD’s Survey of Mortgage estimates available, the size of the data. For single-family owner originations,
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HMDA provides comprehensive information B. Comments on HUD’s Market Share continuation of recent conditions of on borrower incomes and census tract Methodology economic expansion and low interest rates. locations for metropolitan areas. According to the GSEs, HUD’s range of Unfortunately, it provides no information on 1. Overall Issues market estimates did not include periods of the incomes of renters living in mortgaged Both Fannie Mae and Freddie Mac stated adverse economic and affordability properties (either single-family or that HUD’s market share model (outlined in conditions such as those which existed in the multifamily) or on the rents (and therefore Section A above) was a reasonable approach early 1990s. HUD believes that the range for the affordability) of rental units in mortgaged for estimating the goals-qualifying (low-mod, the market shares should be broad enough to properties. The AHS, however, does provide special affordable, and underserved areas) reflect the likely volatility in the mortgage a wealth of information on rents and the shares of the mortgage market. Freddie Mac market over the three-year period (2001–03) affordability of the outstanding stock of stated: in which the new housing goals will be in single-family and multifamily rental We believe the Department takes the effect. As explained below and demonstrated properties. An important issue here concerns correct approach in the Proposed Rule by throughout this appendix, HUD’s range of whether rent data for the stock of rental examining several different data sets, using market estimates for each of the housing properties can serve as a proxy for rents on alternative methodologies, and conducting goals is reasonable because it allows for newly-mortgaged rental properties. The sensitivity analysis. We applaud the economic and interest rate conditions POMS data, which were not available during Department’s general approach for significantly more adverse than have existed the 1995 rule-making process, are used below addressing the empirical challenges.12 in the mid-to-late 1990s. As HUD stated in to examine the rents of newly-mortgaged Similarly, Fannie Mae stated that ‘‘* * * its 1995 final GSE rule, policy should not rental properties; thus, the POMS data HUD has developed a reasonable model for necessarily be based on market estimates that supplements the AHS data. The data base assessing the size of the affordable housing include the worst possible economic issues as well as other technical issues market’’. 13 scenarios. related to the goal percentages (such as the However, both GSEs provided extensive To support their contentions, the GSEs need to consider a range of mortgage market criticisms of HUD’s implementation of its made extensive criticisms of the environments) are discussed in Sections F, G, market methodology. Their major comments inadequacies of the major mortgage market and H, which present the market share fall into two general areas. First, the GSEs data bases (such as HMDA and the American estimates for the Low- and Moderate-Income expressed concern about HUD’s assumptions Housing Survey), offering in their place Goal, the Underserved Areas Goal, and the and use of specific data elements both in findings from market share and simulation Special Affordable Goal, respectively. constructing the distribution of property models they had developed. Fannie Mae d. Conclusions shares among single-family owner, single- focused many of its comments on the inadequacy of the single-family-owner data HUD is using the same basic methodology family rental, and multifamily properties and reported by HMDA, arguing that significant for estimating market shares that it used in estimating the goals-qualifying shares for portions of HMDA data are not relevant for during 1995. As demonstrated in the each property type. The GSEs contended that calculating the market standard for remainder of this appendix, HUD has HUD chose assumptions and data sources evaluating GSE performance in the attempted to reduce the range of uncertainty that result in an overstatement of the market around its market estimates by carefully estimate for each of the housing goals. In conventional conforming market. Fannie reviewing all known major mortgage data particular, the GSEs claimed that HUD Mae’s comments on this topic are discussed sources and by conducting numerous overstated the importance of rental properties and critiqued by HUD in Appendix A of this sensitivity analyses to show the effects of (both single-family and multifamily) in its final rule. Freddie Mac focused many of its alternative assumptions. Sections C, D, and E market model and overstated the low-mod, comments on the size of the rental portion of report findings related to the property share special affordable, and underserved areas the mortgage market, concluding that HUD distributions called for in Step 1, while shares of the single-family owner market. had overestimated that portion of the market. Sections F, G, and H report findings related HUD recognizes that there is no single, Both Fannie Mae and Freddie Mac to the goal-specific market parameters called perfect data set for estimating the size of the commented extensively on the need for the for in Step 2. These latter sections also report affordable lending market and that available market estimates to reflect the significant the overall market estimates for each housing data bases on different sectors of the market volatility that exists in the single-family and goal calculated in Step 3. must be combined in order to implement its multifamily mortgage markets. In this regard, During the 1995 rule-making process, HUD market share model (as outlined in Section the GSEs relied heavily on a Freddie-Mac- contracted with the Urban Institute to A.2 above). funded study by PriceWaterhouseCoopers comment on the reasonableness of its market While HUD recognizes that existing (PWC), entitled ‘‘The Impact of Economic share approach and to conduct analyses mortgage market data bases vary in terms of Conditions on the Size and the Composition related to specific comments received from comprehensiveness and quality, HUD of the Affordable Housing Market’’ (dated the public about its market share believes that the GSEs have exaggerated the April 5, 2000). Because the GSEs’ comments methodology. Several findings from the inadequacies of available mortgage market (especially those of Freddie Mac) draw Urban Institute reports are discussed data, such as HMDA-reported data on the heavily upon the PWC study, the next section throughout this appendix. Since 1995, HUD borrower income and census tract reports and critiques its main findings. This has continued to examine the reliability of characteristics of mortgages for single-family analysis of the PWC report also incorporates data sources about mortgage activity. HUD’s owner properties. In addition, as explained related GSE comments where appropriate. Office of Policy Development and Research below and demonstrated throughout this Following that, other major issues raised by has published several studies concerning the appendix, HUD has carefully combined the GSEs about HUD’s market estimates will reliability of HMDA data. 10 In addition, since various mortgage market data bases in a be examined. 1995, HUD has gathered additional manner which draws on the strength of each The discussion in the remainder of this information regarding the mortgages for in order to implement its market section assumes readers are familiar with the multifamily and single-family rental methodology and to arrive at a reasonable market methodology and related concepts properties through the Property Owners and range of estimates for the three goals- developed in later sections of the appendix. Managers Survey (POMS). 11 Findings qualifying shares of the mortgage market. In There is no attempt in this section to fully regarding the magnitude of multifamily this appendix, HUD demonstrates the develop the various concepts. Rather, the originations, as well as the rent and robustness of its market estimates by purpose of this section is to provide, in one affordability characteristics of mortgages reporting the results of numerous sensitivity place, HUD’s insights and comments on the backing both single-family and multifamily analyses that examine a range of assumptions more important issues raised by the GSEs in rental properties have been made by about the relative importance of the rental their comments and by combining data from POMS with that from and owner markets and the goals-qualifying PriceWaterhouseCoopers in its report. It internal Census Bureau files from the 1995 shares of the owner portion of the mortgage should be noted that the GSEs’ comments are American Housing Survey-National Sample. market. also discussed throughout the development The results of these more recent analyses will Second, both GSEs argued that HUD’s of the market share methodology in this be presented in the following sections. market estimates depended heavily on a appendix.
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2. PriceWaterhouseCoopers (PWC) Study conventional conforming market if they are utilizing estimates for single-family The main purpose of the PWC study was to be used in connection with the housing origination volume far exceeding realistic to address how the business cycle affects the goals. Because of these statutory figures for the conventional conforming affordability of mortgages originated in the considerations, PWC’s calculations (which segment of the single-family mortgage conventional conforming mortgage market. effectively include mortgages outside the market. When HUD implemented PWC’s Based on its analysis of the 1990–98 conventional conforming market) cannot be HMDA-based procedure for calculating the mortgage market, PWC concluded that (a) relied upon for policymaking purposes. size of the multifamily market, it derived an changing economic conditions can quickly PWC’s error (overstating single-family average multifamily mix of 11.6 percent for impact the low-and moderate-income portion originations), combined with their 1991–1998, well above the PWC figure of 8.7 underestimating multifamily originations percent. of the mortgage market; (b) the highly • affordable economic conditions that have (see above), leads PWC to substantially Results of PWC simulations are existed since 1995 are not likely to persist in underestimate the multifamily share of the contradicted by historical evidence. For the future; and (c) it is difficult to project conventional conforming mortgage market, example, PWC simulates a refinance boom affordable lending levels accurately. PWC which further leads them to substantially and under one scenario projects that the low- argues that HUD’s basing its market shares on underestimate the low- and moderate-income mod share of the market would fall to 40 the recent past may lead to unrealistic share of the market. percent. However, during the 1998 refinance housing goals. The PWC study focuses on the low-mod wave, the low-mod share of the market was HUD’s review of the PWC study found that share of the mortgage market during the 54 percent, and even GSE performance it included several interesting analyses and 1990s. PWC claims that the low-mod share of exceeded 45 percent, suggesting that PWC insights about economic volatility. For the market ranged from 35 percent to 56 overestimates the effect of a refinance boom example, its regression analyses of the percent during the 1990s, with a mean of 46 on the low-mod share. multifamily and affordable lending shares of percent. These figures are contrasted with Mainly for the above reasons, PWC the market highlight the impacts that shifts HUD’s 50–55 percent projection of the low- substantially underestimates the size of the in economic conditions can have on these mod market for the years 2001–03. The low-mod market during the 1990s. Using sectors of the market, as well as the difficulty following are observations about this and realistic estimates of the multifamily market in modeling changes in market conditions. other findings in the PWC report. outlined in Section C, HUD derives an • The PWC document also included a useful PWC begins its analysis by estimating average low-mod share of 52 percent during critique of existing mortgage market data the low-mod share of the existing mortgage the 1990s, substantially higher than the 46 bases. In the event of a severe economic market and then applying its results to an percent average advocated by PWC. downturn, the PWC study will serve as an analysis of the low-mod share of the market The remainder of the section summarizes interesting reference document for for newly-originated mortgages. In the top the main comments of Fannie Mae and policymakers and mortgage market analysts portion of its Table 2, PWC assumes the low- Freddie Mac on HUD’s market share concerned about the implications of the mod share of the existing housing stock is 50 methodology. Because the GSEs relied business cycle for affordable lending. percent. In fact, it can be shown empirically heavily on the PWC study or a similar In relation to the policy discussion that the actual proportion is 56.8 percent analysis, the points in this section will apply surrounding the GSE housing goals, however, based on data from AHS and the Property to their comments as well. the PWC document contains significant Owners and Managers Survey (POMS).15 3. Volatility of the Mortgage Market shortcomings. A major shortcoming is that PWC then proceeds to compound this error. the PWC document underestimates the size Based on the mistaken assumption that 50 Based on the PWC study and their own of the multifamily mortgage market by percent of the housing stock is occupied by analyses, both GSEs contended that HUD had relying heavily on multifamily originations low- and moderate-income households, PWC not adequately considered the impact that reported in HMDA. While HMDA is for many infers that the low-mod share of the stock of changes in the national economy could have purposes a preeminent data source on single- mortgaged owner-occupied properties is 31 on the size of the conventional conforming family lending, it has been widely percent. Empirically, however, the correct mortgage market. The GSEs commented that discredited as a multifamily data source due figure is 37 percent, based on AHS data. HUD based its market estimates on the to severe underreporting of loan originations. • Based on HUD’s best estimates of the unusually favorable economic and housing Indeed, HMDA has been rejected as multifamily market, the multifamily mix market conditions that have existed since inadequate in published work by highly averaged 16–17 percent for 1991–1998, not 1995. Fannie Mae stated that HUD’s analysis regarded independent researchers, as well as 8.7 percent as estimated by PWC.16 PWC’s overstates the size of the market because it by Fannie Mae in its comments submitted in multifamily mix is unrealistically low ‘‘does not reflect the potential effects of a response to HUD’s proposed rule. because of their reliance on a flawed, HMDA- broader range of plausible economic Another major shortcoming of the PWC based methodology which underestimates scenarios’’. Freddie Mac recommended that report is an error in calculating the size of the the size of the conventional multifamily ‘‘the market estimates in the Final Rule be single-family conventional conforming origination market, and because they used revised to reflect the large impact of market. The discussion of single-family techniques for estimating the size of the economic conditions on the very-low, low- lending in the PWC document initially single-family mortgage market equivalent in and moderate-income, and underserved appears to contradict HUD’s analysis in several years to including FHA and jumbo areas’ shares of the market’’. As noted earlier, Appendix D of the proposed rule, but this is single-family loans. Inclusion of loans both GSEs relied on the PWC study which mainly because HUD’s analysis is based upon outside the conventional conforming market concluded that ‘‘interest rate movements and the conforming conventional mortgage is inappropriate for purposes of setting the changes in the rate of economic growth are market, whereas PWC effectively includes housing goals, as discussed above. statistically significant determinants of the FHA loans and loans above the conforming • Although Fannie Mae relies on the PWC low- and moderate-income share of the loan limit in portions of their analysis of the study, Fannie Mae’s multifamily market conventional conforming mortgage market by 1980–98 mortgage market. For example, in estimates are higher than PWC’s—for affecting both the multifamily share of 1998, PWC estimates the size of the single- example, Fannie Mae’s $35–$40 billion aggregate lending and the affordability family mortgage market at $1.5 trillion. This multifamily origination estimate for 1997 composition of single-family lending’’. (PWC, is identical to the widely used estimate by leads to a multifamily mix of 16–18 percent page iv). the Mortgage Bankers Association (MBA) for (versus 11 percent for PWC) and its $40–$45 As explained in Appendix A and Section the entire single-family mortgage market that billion estimate for 1998 leads to a 11–12 F of this appendix, HUD understands that the year, including jumbo and FHA loans.14 percent multifamily mix (versus 7.3 percent current levels of interest rates, home prices, Because the GSEs are prohibited from for PWC). borrower incomes, alternative rental costs, purchasing loans above the conforming limit, • In calculating the multifamily share of and consumer confidence, as well as and because HUD is directed by statute to housing units financed each year (the expectations about their future levels, play a focus on the conventional market in setting ‘‘multifamily mix’’) PWC compounds the role in determining whether homeownership the housing goals, it is necessary to restrict problems associated with its unrealistically is feasible or desirable for any particular analyses of the mortgage market to the low figure for multifamily originations by household. HUD is also aware that the
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Size of the Multifamily Market alternative multifamily mix assumptions of market is difficult. Section C contains a detailed discussion of 13.5 is also considered, as well as a number In response to concerns expressed about the size of the conventional multifamily of others. the volatility of the mortgage markets over origination market, summarizing findings 5. Size of the Single-Family Rental Market time, HUD has estimated a range of market from a variety of sources regarding the size shares for each of the housing goals—50–55 of the conventional multifamily mortgage Both GSEs argued that the single-family (1– percent of the Low-Mod Goal, 23–26 percent market, measured in terms of dollars, units, 4) investor portion of the single-family for the Special Affordable Goal, and 29–32 and as a share of total conventional mortgage market should be eight percent or percent for the Underserved Areas Goal—that conforming annual mortgage origination less of total single-family originations, based reflect economic environments significantly volume, a key factor influencing the share of on HMDA data. In both 1995 and in the more adverse than those which existed the overall market comprised of units proposed rule, HUD considered three during the period between 1995 and 1998, meeting each of the housing goals. This scenarios for investor mortgages when when the Low-Mod Goal averaged 56.5 section considers a number of alternative estimating the housing goals—a baseline percent, the Special Affordable Goal, 28.1 data sources providing evidence on model that assumed 10 percent, a lower percent, and the Underserved Areas Goal, conventional multifamily origination volume scenario that assumed 8 percent, and a higher 33.0 percent. over a number of years, in some cases the scenario that assumed 12 percent. HUD’s HUD conducted detailed sensitivity entire 1990–1999 period. The approaches base case of 10 percent is well below the 17.3 analyses for each of the housing goals to considered here include the HUD Survey of percent reported by the 1991 Residential reflect affordability conditions that are less Mortgage Lending Activity (SMLA); Home Finance Survey (which is considered conducive to lower-income homeownership Mortgage Disclosure Act data (HMDA); and a accurate but unfortunately is out-of-date) and than those that existed during the mid- to projection model developed by the Urban above the 7–8 percent estimates provided by late-1990s. The following examples drawn Institute based on data from the 1991 HMDA over the past few years. In 1995, from Sections F and H of this appendix may Residential Finance Survey (RFS). A new research by Urban Institute researchers be helpful in clarifying this issue: methodology, developed by HUD for concluded that the HMDA estimates were too • The low-mod percentage for single- purposes of this analysis, is discussed, as are low (although the GSEs raise concerns about family home purchase loans can fall to as low estimates submitted by Fannie Mae and this research in their comments). HUD has as 34 percent—or four-fifths of its 1995–98 Freddie Mac on their comments on the decided to stay with its baseline 10 percent average of over 42 percent—before the proposed rule. Estimates for 1990 from the estimate but it acknowledges that due to projected low- and moderate-income share of RFS and for 1995 from the Property Owners limited data there is some uncertainty about the overall market would fall below 50 and Managers Survey (POMS) are also the investor share of the single-family percent. discussed. market, which will be clarified when the next • Similarly, the underserved areas Based on the likely range of annual Residential Finance Survey is released in a percentage for owner loans can fall to as low conventional multifamily origination couple of years. Sensitivity analyses indicate as 22 percent—also about four-fifths of its volume, multifamily units represent an that reducing the investor share from 10 1995–98 average of almost 27 percent— average of 16–17 percent of units financed percent to 8 percent would reduce the low- before the projected underserved areas share each year during the 1990s.17 HUD’s mod market share by 1.05 percent, the special affordable share by 0.90 percent, and of the overall market would fall below 29 estimated multifamily market shares exceed the underserved areas share by 0.36 percent. percent. estimates prepared by PWC (averaging 8.7 HUD also conducted additional sensitivity percent for 1991–1998) for two reasons, as 6. Relevant Market for Single-Family Owner analyses by examining recession and mentioned previously. One is that PWC’s Market refinance scenarios and varying other key adjusted HMDA methodology does not Both GSEs provided numerous comments assumptions, such as the size of the adequately correct for underreporting in concerning the types of mortgages that HUD multifamily market. These sensitivity HMDA, resulting in unrealistically low should exclude from the definition of the analyses, presented in this appendix, show estimates of the size of the conventional single-family owner market when HUD is that HUD’s market estimates cover a range of multifamily origination market. Another calculating the market shares for each mortgage market and affordability conditions reason that PWC’s estimated multifamily housing goal. The GSEs comments and and provide a sound basis for setting housing market shares are low is that a number of HUD’s response to them are discussed in goals for the years 2001–03. their calculations appear to include FHA and Section A of Appendix A. As noted there, HUD recognizes that under certain jumbo loans in estimating the number of HUD believes that the risky, B&C portion of extremely adverse circumstances, the goals- single-family units financed each year, as the subprime market should be excluded qualifying market shares could fall below its discussed above. HUD’s market share from the market definition for each of the estimates. The PWC study and the GSEs calculations, in contrast, are based on the housing goals. HUD includes the A-minus presented estimates based on a hypothetical multifamily share of conventional portion of the subprime market in its market economic slowdown accompanied by low conforming mortgage loans originated each estimates. This appendix explains HUD’s affordability conditions that fall below the year. method for making this adjustment to the range of HUD’s estimates. Fannie Mae, for The multifamily share of the conforming overall market estimates. example, included mortgage originations conventional market (or ‘‘multifamily mix’’) As explained in Appendix A, HUD falling to as low as $771 billion and as high derived from this discussion of multifamily disagrees with most of the other adjustments as $1,706 billion in its ‘‘likely single family origination volume is utilized below as part proposed by the GSEs. Excluding important mortgage market volume ranges’’ for the year of HUD’s analysis of the share of units segments of the lower-income mortgage 2001. However, as HUD stated in its 1995 financed each year meeting each of the market as the GSEs recommend would distort GSE rule, setting goals so that they can be housing goals. For purposes of that analysis, HUD’s estimates of the goals-qualifying met even under the worst of circumstances a multifamily mix of 16.5 percent is shares of the conventional conforming is unreasonable. If macroeconomic reasonable, based upon the analysis and market. conditions change dramatically, then the discussion below. However, a 15 percent levels of the goals can be revised to reflect market share can be utilized as an alternative 7. Shortcomings of Various Mortgage Market the changed conditions. As discussed below market share estimate corresponding to a Data Bases in Section F, FHEFSSA and HUD recognize somewhat less favorable environment for Major mortgage market data bases such as that conditions could change in ways that multifamily lending. While somewhat low HMDA and the American Housing Survey would require revised expectations. Thus, from an historical standpoint, a 15 percent (AHS) are used to implement HUD’s market
VerDate 112000 18:02 Oct 30, 2000 Jkt 194001 PO 00000 Frm 00145 Fmt 4701 Sfmt 4700 E:\FR\FM\31OCR2.SGM pfrm08 PsN: 31OCR2 65188 Federal Register / Vol. 65, No. 211 / Tuesday, October 31, 2000 / Rules and Regulations methodology. In their comments, Fannie Mae provides excellent information on the ‘‘effectively are based on an analysis of and Freddie Mac, as well as PWC, each affordability characteristics of the single- mortgage lending patterns since 1995.’’ provided a useful critique of the various family rental and multifamily housing stock. Freddie Mac is incorrect, as explained in B.3 mortgage data bases. Based on its analysis, As explained in Section F of this appendix, above and throughout this appendix. For Freddie Mac concluded that HUD should POMS data confirm that the rent affordability example, as reported in Table D.15 below, revise its market share estimates to reflect data based on the AHS stock provide reliable the low-mod share of the conventional ‘‘the lack of reliable data’’. Similarly, Fannie estimates of the rent characteristics of newly- conforming market has averaged over 56 Mae concluded that ‘‘HUD analysis mortgaged dwelling units in the rental stock. percent since 1995; this compares with overstates the size of the market because it HUD’s specific responses to the GSEs’ HUD’s projection of 50–55 percent for this relies on unreliable data sources. * * *’’. comments on data are included throughout market. Fannie Mae further states that ‘‘* * * HUD these appendices. For example, see • On page 6 of its Appendix III, Freddie has chosen to extrapolate from several subsection B.4 above and Section C of this Mac states that HMDA accurately reports disparate data sources in ways that inflate the appendix for a discussion of the multifamily multifamily originations for commercial Department’s estimate of the market size for data; as explained there, HUD concludes that banks. HUD’s analysis concurs with that of each of the goals’’. PWC, as well as the GSEs, Freddie Mac and PWC, in particular, other researchers that HMDA significantly expressed concern that mortgage market data underestimate the size of the multifamily underreports multifamily originations by bases had not improved since 1995, when market. Issues related to single-family rental commercial banks. For example, Crews, HUD issued its last GSE rule on the housing data are discussed in B.5 above and in Dunsky and Follain (1995) conclude that goals. Section D to this appendix. Appendix A ‘‘HMDA surely underestimates lending by Examples of problems noted by the GSEs provides a complete discussion of the single- both mortgage bankers and commercial include: limited variables (such as LTV ratio) family owner data reported in HMDA. As banks.’’ 18 and bias in HMDA data; inability of HMDA noted in Section A of Appendix A, HUD • On pages 20–21, Freddie Mac uses the to identify important segments of the market disagrees with the GSEs in terms of the AHS and POMS to estimate the distribution (such as subprime lenders); underreporting of seriousness of the bias problem in HMDA of newly-mortgaged units by property type. multifamily mortgages in HMDA and general data. It should also be mentioned that HUD Based on this analysis, Freddie Mac unreliable reporting of rental mortgages in does not rely heavily on some of the data estimates that multifamily units represented other data bases; underreporting of income in bases that the GSEs criticize. For example, 10.6 percent of newly financed dwelling the AHS; and the fact that some important Freddie Mac argues that the AHS units over the 1993–95 period. Based on mortgage market data bases such as the 1991 underreports borrower income; but HUD HUD’s calculations, however, multifamily Residential Mortgage Finance Survey are relies on HMDA data for the borrower units were 20.6 percent of conventional simply out of date. Both GSEs expressed income characteristics of home purchase and conforming units financed during 1993– particularly strong criticism of HUD’s use of refinance markets. According to the out-of- 1995. Freddie Mac may have underestimated data on the rental market, that is, estimates date RFS data, investor mortgages account for the number of rental units by excluding of the proportion of 1-to 4-unit rental 17 percent of the single-family mortgage observations with missing origination year, properties and of annual multifamily market the RFS; as explained in above, and may have overestimated the number of origination volume. HUD’s baseline model uses 10 percent, with single-family units by including jumbo or HUD agrees that a comprehensive source of sensitivity analyses at 8 percent and 12 FHA loans. information on mortgage markets is not percent. • In its comments (page 30) about the low- available. However, HUD considered and mod goal, Freddie Mac states that ‘‘an analyzed a number of data sources for the 8. Miscellaneous Comments analysis limited to the exceptional economic purpose of estimating market size, because There are several specific comments of the environment since 1995 would suggest a no single source could provide all the data GSEs that should be mentioned and clarified. narrow range centered at 50 percent * * *’’. elements needed. In these appendices, HUD In many cases, these comments relate to the As explained in Section F of this appendix, has carefully defined the range of uncertainty broad issues that have already been the low-mod goal averaged 56.5 percent associated with each of these data sources, discussed in this section. However, because between 1995 and 1998. has pulled together estimates of important of their technical nature, it was decided to • On pages 34 and 35 of its comments, market parameters from independent discuss them in this separate section rather Fannie Mae states that HUD’s approach to sources, and has conducted sensitivity than including them in the above discussion. housing and economic conditions involves analyses to show the effects of various • On page 17 of its Appendix III, Freddie ‘‘point estimates’’. As this appendix makes assumptions. In fact, Freddie Mac noted that Mac states that HUD assumed the investor clear, HUD’s analysis is based on a range of ‘‘We [Freddie Mac] support the Department’s share of single-family mortgages was 10.7 market estimates—not point estimates as approach for addressing the empirical percent; in fact, HUD’s baseline model stated by Fannie Mae. Of course, the ‘‘likely challenges of setting the goals by examining assumed 10 percent. single-family mortgage market volume several different data sets, using alternative • On page 22 of its Appendix III, Freddie ranges’’ chosen by Fannie Mae are not methodologies, and conducting sensitivity Mac states that because HMDA does not necessarily the ones HUD would choose for analysis.’’ identify subprime and manufactured housing setting housing goals for the next three years. While HUD recognizes the shortcomings of loans, the proposed rule does not adjust for Fannie Mae offers wide ranges in mortgage the various data and the inability to derive these loans originated by prime lenders. As market projections for the years 2001–03; for precise point estimates of various market this appendix explains, HUD’s market example, $771 billion to $1,706 billion is its parameters, HUD, however, does not believe estimates for the three housing goals are projection for the year 2001. that these limitations call for expanding the adjusted for all loans originated in the B&C • Fannie Mae states ‘‘HUD should provide range of the market estimates, as suggested by portion of the subprime market. an explicit range of goals based upon the GSEs. One purpose of this appendix is to • On page 23 of its Appendix III, Freddie differing economic outlooks with reasonable demonstrate that careful consideration of Mac states that HUD does not compare chances of occurring—ranging from modest independent data sources can lead to reliable HMDA and GSE data with the same precision recession to a continued boom economy’’. As ranges of estimates for the goals-qualifying as Berkovec and Zorn because HUD has demonstrated in Sections F–H, HUD’s market shares of the mortgage market. It should also included HMDA-reported non-metropolitan ranges are reasonably set to include much be emphasized that while there are some loans, which are poorly reported by HMDA. more adverse economic and affordability problems with existing mortgage market data, Freddie Mac is incorrect. HUD’s analysis in conditions than have existed during the past there is a wealth of information on important Table A.4a is based on HMDA and GSE data few years. components of the market. HMDA provides for only metropolitan areas. In addition, HUD • On pages 66–67, Fannie Mae estimates a wide coverage of the single-family owner does not include GSE purchases of FHA market range of 48–51 percent for the Low- market in metropolitan areas, yielding loans in Table A.4a, as suggested by Freddie Mod Goal, 21–24 percent for the Special important information on the borrower Mac. Affordable Goal, and 24–28 percent for the income and census tract (underserved area) • On page 1 of its Appendix III, Freddie Underserved Areas Goals; the range covers a characteristics of that market. The AHS Mac states that HUD’s market projections recession scenario and a growth scenario and
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For example, in different institutional types of mortgage areas goal) than suggested by HUD’s market 1999, 9.5 percent of units financed by Fannie lenders. Data on lending by savings share estimates. Fannie Mae assumes a lower Mae were multifamily, but 95 percent of associations were collected for HUD by the percentage of single-family and multifamily those units met the Low- and Moderate- Office of Thrift Supervision; these data cover rental properties than HUD, which is one Income Goal, accounting for 20 percent of all reason Fannie Mae obtains lower market of Fannie Mae’s low- and moderate-income all thrifts, not a sample. Mortgage company estimates than HUD. Fannie Mae assumes purchases for that year.20 Multifamily and life insurance company data were that the goals-qualifying shares for the single- acquisitions are also of strategic significance collected through sample surveys conducted family owner market can fall to their 1993 with regard to the Special Affordable Goal. In by the Mortgage Bankers Association of levels when, for example, the underserved 1999, 43 percent of units backing Freddie America and the American Council of Life areas share of the owner market equaled 20 Mac’s multifamily acquisitions met the Insurance, respectively. Data on commercial percent. As explained in Section G, HUD’s Special Affordable Goal, representing 22 banks and mutual savings banks were range of market estimates (29–32 percent) for percent of units counted toward its Special collected through sample surveys conducted the underserved areas goal is consistent with by a number of different entities over the the underserved areas owner percentage for Affordable Goal, at a time when multifamily years. Federal credit agencies such as the the single-family market falling from its units represented only 8.3 percent of total 21 U.S. Small Business Administration and average of 28 percent over the 1995–98 annual purchase volume. period to 22 percent. Fannie Mae’s assumes This discussion is organized as follows: HUD non-FHA programs as well as State an additional two percentage point decline in Section 1 identifies and evaluates available credit agencies such as housing finance its sensitivity analysis. It should also be data resources regarding the dollar value of agencies reported their data directly to HUD. noted that while Fannie Mae adjusts for B&C conventional multifamily mortgage Local credit agency data are collected by loans, it does not make the 1–2 percentage origination during 1990–1999. Section 2 HUD staff from a publication that lists their point upward adjustment to incorporate the discusses loan amount per unit, a key mortgage financing activities. The SMLA was effects of underserved counties in non- parameter in estimating the number of units discontinued by HUD in 1998, and data are metropolitan areas. backing multifamily originations. Section 3 available only through 1997. summarizes findings from a variety of Commercial bank data in the SMLA have 9. Conclusions sources regarding the size of the conventional been questioned by a number of researchers. In considering the levels of the goals, HUD multifamily mortgage market, measured in Part of the problem arises from the possibility carefully examined the comments on the terms of dollars, units, and as a share of total of double-counting of originations by methodology used to establish the market conventional conforming annual mortgage mortgage banks in the American Bankers share for each of the goals. Based on that origination volume, a key factor influencing Association (ABA) and Mortgage Bankers thorough evaluation, as well as HUD’s the share of the overall market comprised of Association (MBA) surveys conducted as part additional analysis, the basic methodology units meeting each of the housing goals. of SMLA. Originations by mortgage banks employed by HUD is a reasonable and valid Inferences regarding the likely range and approach to estimating market share and the which are affiliated with commercial banks ‘‘baseline’’ estimates of annual multifamily may be counted in both surveys. A 1995 percentage range for each of the three market origination volume for 1990–1999 are drawn. share estimates do not need to be adjusted analysis prepared by Crews, Dunsky and from those reported in the proposed rule. 1. Multifamily Data Sources Follain found that, in 1993, the SMLA conventional origination figure of $30 billion While a number of technical changes have This section considers a number of was calculated on the basis of overstated been made in response to the comments, the alternative data sources providing evidence approach for determining market size has not originations by commercial banks, but on conventional multifamily origination been modified substantially. The detailed understated lending volume by mortgage volume over a number of years, in some cases evaluations show that the methodology, as banks, life insurance companies, and the entire 1990–1999 period. The approaches modified, produces reasonable estimates of individuals. Taking all of these factors into the market share for each goal. HUD considered here include the HUD Survey of Mortgage Lending Activity (SMLA); Home consideration, as well as other evidence, they recognizes the uncertainty regarding some of conclude that actual 1993 origination volume these estimates, which has led the Mortgage Disclosure Act data (HMDA); and a projection model developed by the Urban appears to be in the range of $25-$30 Department to undertake a number of billion. 22 sensitivity and other analyses to reduce this Institute based on data from the 1991 Residential Finance Survey (RFS). A new One solution to the double-counting uncertainty and also to provide a range of problem in SMLA is to remove the mortgage market estimates (rather than precise point methodology, developed by HUD for bank subtotal from total origination volume. estimates) for each of the housing goals. purposes of this analysis, is discussed, as are estimates submitted by Fannie Mae and The resulting figure may provide a more C. Size of the Conventional Multifamily Freddie Mac in connection with the accurate representation of conventional Mortgage Market Department’s GSE rulemaking efforts. multifamily lending volume. Table D.2 This section derives projections of Estimates for 1990 from the RFS and for 1995 presents SMLA figures for 1990–1997, conventional multifamily mortgage from the Property Owners and Managers including and excluding mortgage banks. origination volume.19 Survey (POMS) are also discussed. BILLING CODE 4210±27±P
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BILLING CODE 4210±27±C upon two facts. First, HMDA was not One way to address the undercounting b. Home Mortgage Disclosure Act (HMDA) designed to cover multifamily lending by all problem in HMDA is to incorporate an HMDA data are collected by lending lenders; it focuses on lending done primarily adjustment factor to correct for institutions and reported to their respective by commercial banks, thrifts, and large underreporting, for example by multiplying regulators as required by law. HMDA was mortgage bankers in metropolitan areas. each year’s annual total by 1.25, as suggested enacted as a mechanism to permit the public Second, HMDA surely underestimates by PriceWaterhouseCoopers (PWC) in their to determine locations of properties on which lending by both mortgage bankers and report prepared for Freddie Mac in local depository institutions make mortgage commercial banks.’’ 23 In its comments connection with HUD’s proposed rule. loans, ‘‘to enable them to determine whether submitted in response to HUD’s proposed However, this 1.25 correction factor is based depository institutions are filling their rule, Fannie Mae observes that ‘‘HMDA is not upon an estimate of underreporting of single- obligations to serve the housing needs of the considered a reliable source of multifamily family loans in HMDA, and may be too small communities and neighborhoods in which mortgage originations because it provides an to accurately capture the degree of they are located * * *’’ (12 U.S.C. 2801). incomplete view of non-depository multifamily underreporting in HMDA, judging from comparisons between actual HMDA reporting requirements generally institution sources of loans.’’ 24 and HMDA-reported volume by the GSEs and apply to all depository lenders with more It does not appear that HMDA has FHA cited above. than $29 million in total assets and which significantly improved its multifamily To the adjusted HMDA figure, PWC then have offices in Metropolitan Statistical Areas. coverage since the time of the 1995 Crews, adds an estimate for originations by life Reporting is generally required of other Dunsky and Follain analysis. For example, in mortgage lending institutions (e.g. mortgage insurance companies by utilizing figures on 1998, HMDA reports approximately $1 multifamily loan commitments published by bankers) originating at least 100 home billion in FHA multifamily origination purchase loans annually provided that home the American Council on Life Insurance volume, compared with $2.5 billion reported (ACLI), a trade group which conducts regular purchase loan originations exceed 10 percent by FHA. The underreporting appears to be of total loans. Reporting is required for all surveys. Table D.3 shows annual even more serious with regard to GSE loans closed in the name of the lending conventional multifamily origination volume acquisitions. The 1998 HMDA file reports institution and loans approved and later as reported in HMDA, as well as an adjusted approximately $2 billion in Fannie Mae acquired by the lending institution, including HMDA figure including a 1.25 correction multifamily loans. Thus, the HMDA data multifamily transactions, compared with an factor as well as the ACLI figure for loan base concentrates on lending by depository actual total of $12.5 billion. A sizeable commitments in the last quarter of the institutions in metropolitan areas but, unlike shortfall is also evident with regard to preceding year as well as the first three SMLA and RFS, it is not a sample survey; it Freddie Mac, with HMDA reporting 1998 quarters of each origination year. In is intended to include loan-level data on all transactions volume of $295 million, calculating annual totals, the absolute value loans made by the institutions that are compared with an actual figure of $6.6 is taken of loan amounts reporting as required to file reports. billion. negative numbers. The table shows a sharp A deficiency of the HMDA database is that In addition, the HMDA data base does not drop in origination volume between 1990 there is compelling evidence of significant cover a number of important categories of and 1991, possibly associated with the underreporting of multifamily mortgages. In multifamily lenders such as life insurance commercial real estate recession of the early their 1995 analysis, Crews, Dunsky and companies and State housing finance 1990s. However, the implication that Follain conclude ‘‘We clearly demonstrate agencies, providing another reason that the multifamily mortgage lending has remained that HMDA alone is not an accurate measure HMDA data understates the size of the 20 percent below the 1990 level for the entire of the total market. Our argument is based multifamily market. remainder of the decade is inconsistent with
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BILLING CODE 4210±27±C c. Urban Institute Statistical Model of these historical mortgages. The research A difficulty with the adjustment factor In 1995, Urban Institute researchers methodology took account of the influence of approach is that very little is known developed a model to project multifamily interest rate fluctuations on prepayments of regarding the degree of underreporting of origination volumes from 1992 forward, the historical mortgages; the projections multifamily originations in HMDA. There is based on data from the 1991 Survey of assumed that prepayments are motivated no reason that the 20 percent underreporting Residential Finance.25 They applied a mainly by property sales. figure sometimes used in single-family statistical model of mortgage terminations Table D.4 shows annual projected conventional multifamily origination volume discussions of HMDA is applicable to based on Freddie Mac’s experience from the as reported in the Urban Institute model, multifamily. Indeed, if the degree of mid-1970s to around 1990. While mortgage characteristics in 1990 are not wholly similar derived by subtracting actual FHA underreporting of FHA originations or GSE to the characteristics of these historical origination volume from the overall projected acquisitions noted above is representative, mortgages financed by Freddie Mac, multifamily total each year, except in 2000, even the adjusted HMDA figures are likely to nevertheless the prepayment propensities of when 1999 FHA originations are used as a significantly underreport the actual totals. contemporary mortgages may at least be proxy for 2000 originations. approximated by the prepayment experience BILLING CODE 4210±27±P
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BILLING CODE 4210±27±C that excludes non-GSE securities and series identifies securitizations by d. New Methodology for Recent Years repurchased GSE securities is published by depositories, government and insurance In the context of (i) the discontinuation of OFHEO in their 2000 Report to Congress. companies; seasoned loans; GSE transactions; SMLA; (ii) evidence of significant These exclusions are needed in order to and transactions involving foreign collateral, underreporting in HMDA; and (iii) increased avoid double-counting. However, this figure all of which are in order to avoid double- availability of data regarding purely private, must be further adjusted to take into counting. Thus, loans included in this non-GSE securitization of commercial consideration the fact that some of these component consist of nongovernment, non- mortgage loans, HUD has developed a new transactions involved seasoned purchases, GSE securitizations of recently-originated methodology for the purpose of preparing a and a few involve government-insured mortgages by non-depository, non-life lower-bound estimate for the minimum size mortgages. In order to adjust the data for this insurance company institutions. of the multifamily market. The following possibility, the OFHEO figures are reduced (4) Conventional originations by life sources are combined to calculate the by 33 percent, the figure derived by insurance companies. Source: American estimated size of the conventional calculating the proportion of seasoned and Council on Life Insurance (ACLI) quarterly multifamily market in a way that is relatively FHA mortgages among the GSEs’ cash and data on multifamily loan commitments. complete, but which avoids double-counting swap transactions during 1995–1999, using Annual originations estimated by combining and excludes seasoned loans: GSE loan-level data provided to HUD. Any commitment in the last quarter of the (1) HMDA portfolio loans. This component loans sold by depositories to the GSEs would preceding year and the first three quarters of comprises conventional loans originated by be counted here, but not in the HMDA the origination year. depositories and not sold, plus conventional component, which is restricted to loans kept (5) Conventional originations by private loans acquired by depositories but not sold, in portfolio by depositories. pension funds; state and local retirement less overlap between these two categories. In (3) Commercial Mortgage Backed Security funds; federal credit agencies; state and local principle, if a loan originated during the multifamily loans. Commercial Mortgage credit agencies. Source: SMLA (1990–1997). current year is acquired by a depository, it Alert, Hoboken NJ, publishes detailed, Data not available for 1998 and subsequent should show up as an origination. However, transaction-level database that provides years. due to underreporting, this is not always the information on transaction size and the This methodology is intended to generate case. The procedure utilized here is to sum proportion of collateral comprised by a lower-bound estimate for the annual size of conventional originations by depositories multifamily collateral for the entire 1990– the conventional multifamily mortgage and conventional acquisitions by 1999 period. Multifamily loan amounts at the origination market. A more accurate and depositories, and then to utilize a matching transaction level are derived by applying the realistic estimate could be derived if procedure to identify loans falling into both multifamily proportion to the transaction corrections for the following could be categories, which are then subtracted. amount. These transaction-level loan generated: (2) GSE purchases of current-year amounts are then aggregated over all (1) HMDA under-reporting. To the extent acquisitions. A data series on GSE transactions conducted during a calendar that lenders do not report to HMDA, this data multifamily transactions covering 1995–1999 year to derive an annual total. This data source leads to downward bias in origination
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e. Fannie Mae with HUD staff in connection with the Fannie Mae provided estimates for 1997– Fannie Mae has developed a number of Department’s 1995 GSE final rule, Fannie 1999 based on a combination of data sources Mae estimated the size of the market in 1994 including SMLA, HMDA, ACLI, Commercial estimates of the size of the conventional at $32.2 billion, and in 1995 at $33.7 billion. Mortgage Alert, and the Office of Thrift multifamily mortgage market that it has In discussions with HUD staff in Supervision. Fannie Mae’s estimates are shared with the Department. In discussions connection with the 2000 proposed rule, summarized in Table D.6.
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f. Freddie Mac to adjust for underreporting, plus estimated Owners and Managers Survey (POMS). In In its comments submitted in response to originations by life insurance companies, discussions with HUD staff in connection HUD’s proposed rule, Freddie Mac provided pension funds, and government credit with the 2000 proposed rule, Freddie Mac estimates of the size of the conventional agencies. Other estimates are derived by staff provided an estimate of the 1998 multifamily market for 1995–1997. Some of combining HMDA with SMLA. Freddie Mac conventional multifamily market of $40–$50 these estimates are derived from HMDA, derives an alternative estimate for 1995 using billion. Freddie Mac’s estimates are incorporating a 25 percent expansion factor the public-use version of the Property summarized in Table D.7.
BILLING CODE 4210±27±C in 1990. Because loans originated during HUD Property Owners and Managers g. Other Estimates 1989–1991 are grouped together during in the Survey (POMS). HUD’s analysis of data in the public use version of the RFS, a combined HUD Property Owners and Managers Survey 1990 Residential Finance Survey (RFS). figure for loans originated over this time (POMS) yields an estimated size of the 1995 The 1990 Residential Finance Survey (RFS) period must be divided by 21⁄3 to derive multifamily origination market of can be utilized to derive an estimate of the estimated 1990 conventional origination approximately $37 billion. Analysis of this size of the conventional multifamily market volume of $37.4 billion. survey data is complicated by virtue of the
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2. Loan Amount per Unit appear to be a major shortcoming for the While HUD’s market share analysis for Another issue regarding the multifamily purposes of this analysis. purposes of this final rule does not rely on mortgage market concerns average loan The GSE loan-level data are not available assumptions regarding per-unit loan amounts amount per unit. This ratio is used in for 1990–1992. For this time period, on a going-forward basis, further discussion converting estimates of conventional therefore, multifamily loan amount per unit of the issue is warranted in light of comments must be estimated utilizing an alternative multifamily lending volume as measured in by Freddie Mac in response to the analysis dollars into a number of units financed. For technique. The method utilized here is to calculate the ratio of the average supporting HUD’s proposed rule. Freddie this purpose, the ratio of total UPB to total Mac forecasts that per-unit loan amounts will units financed, rather than UPB on a conventional conforming single-family ‘‘typical’’ multifamily unit, is the appropriate mortgage to the average per-unit multifamily rise to $37,500 to $40,000 over 2000–2003. measure, since the objective of this exercise mortgage loan amount over 1993–1998. 26 This forecast is based in part upon a sudden is to convert total UPB to total units financed. The resulting figure (3.57) is then applied to increase in GSE per-unit loan amounts from For the purposes of estimating the number average single-family loan amounts over approximately $31,000 in 1998 to more than of units financed in the conventional 1990–1992 to derive estimated multifamily $35,000 in 1999. In reality, however, this multifamily market during 1993–1998, per-unit loan amounts for this earlier time increase is almost entirely attributable to publicly available GSE loan-level data appear period. The resulting annual multifamily per- Freddie Mac, which experienced an increase to generate reasonable loan amount per unit unit loan amount series for 1990–1998 is in per-unit loan amount of more than $10,000 applied in the following section of this figures. The public use version of the GSE over 1998–1999, in contrast to Fannie Mae, data do not provide a means for excluding discussion to the estimated dollar volume of which experienced an increase of only about seasoned loans, which limits the usefulness conventional multifamily originations to of the data for the purpose of analyzing derive an estimate of annual origination $200 over this time period. (See Table D.9 for current-year originations, but this does not volume measured in dwelling units. details.)
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BILLING CODE 4210±27±C
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Additional information regarding Rather, it appears to reflect changes in D.10 brings together the various estimates multifamily loan amount per unit can be Freddie Mac’s business practices which may discussed here, and presents the results of derived from loan-level data on multifamily or may not be evident in future years.27 calculations of the multifamily share of the mortgages contained in prospectus conventional conforming mortgage market disclosures. This data source yields an 3. Conventional Multifamily Origination Volume, 1990–1999 derived using per-unit loan amounts average per-unit loan amount of discussed above.28 As discussed below in approximately $31,000 in both 1998 and Taken by itself, none of the data sources Section E, the multifamily share of units 1999, based on $12.5 billion in 1998 non-GSE appears to definitively answer the question of multifamily transactions and $9.2 billion the the size of the market each year for the entire financed in the conventional conforming following year. Thus, the large increase in time period, but taken together, the various market (or ‘‘multifamily mix’’) is a key loan-amount per unit in the GSE data for data sources can be compared and analyzed determinant of the share of units meeting 1999 does not appear to be representative of in relation to each other in order to each of the HUD housing goals. larger trends in the multifamily market. determine a likely range of estimates. Table BILLING CODE 4210±27±P
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In the 1991–1994 period, the SMLA can be example, the 1992 revised SMLA estimate of the ‘‘augmented’’ HMDA methodology utilized to derive annual estimates of $23.5 billion is relatively close to the Urban introduced by PWC adequately corrects for multifamily origination volume after Institute (UI) estimate of $28.7 billion during undercounting. The likely range of estimates removing originations by mortgage banks in the period of time when the UI projection for the 1991–1994 period therefore express a order to eliminate double-counting of lending model is presumably most reliable, since it range of uncertainty around the revised in the commercial bank and mortgage bank was based on the 1991 RFS, a relatively SMLA figures. surveys included in SMLA. The plausibility recent data source during the early 1990s. In 1995, it appears likely that actual of the revised SMLA estimates during this The 1994 revised SMLA estimate of $31.7 origination volume lies somewhere between time period is enhanced by their proximity billion is relatively close to the Fannie Mae the revised SMLA ($32.4 billion) and POMS to other, independently derived figures. For estimate of $32.2 billion. It is not clear that ($36.7 billion) estimates. The Freddie Mac
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POMS figure of $27 billion, based on the state and federal agencies, it would appear to percentages are much higher for the two public-use version of the POMS file, may be be on the low side of the likely range. Based rental categories argues strongly for affected adversely by topcoding, and for this on information on origination volume disaggregating single-family mortgage reason the HUD POMS estimate, derived represented by these omitted categories in originations by property type. This section from internal Census data, may be considered the years prior to discontinuation of the discusses available data for estimating the more reliable. The Fannie Mae estimate of SMLA, a likely range of $45–$48 billion for relative size of the single-family rental $33.7 billion lies approximately in the 1999 may be derived. mortgage market. middle of the reasonable range of $33-$35 Multifamily Mix During the 1990s. Based The RFS and HMDA are the data sources billion for 1995. Freddie Mac’s HMDA-based on the likely range of annual conventional for estimating the relative size of the single- methodology, generating an estimate of $21 multifamily origination volume, multifamily family rental market. The RFS, provides billion, appears to suffer from significant units represent an average of 16–17 percent mortgage origination estimates for each of the undercounting as discussed above. Overall, of units financed each year during the three single-family property types but it is the Fannie Mae multifamily estimates 1990s.30 HUD’s estimated multifamily market quite dated, as it includes mortgages summarized here appear to reflect more shares exceed estimates prepared by PWC originated between 1987 and 1991. HMDA careful consideration of the various (averaging 8.7 percent for 1991–1998) for two divides newly-originated single-family components of the multifamily market, in reasons.31 One is that PWC’s adjusted HMDA mortgages into two property types:32 contrast to the mechanical application of a 25 methodology does not adequately correct for (1) Owner-occupied originations, which percent correction factor to the HMDA data underreporting in HMDA, resulting in include both SF–O and SF 2–4. by Freddie Mac, based on estimated single- unrealistically low estimates of the size of the (2) Non-owner-occupied mortgage family underreporting. conventional multifamily origination market. originations, which include SF Investor. HUD’s new methodology can be utilized Another reason that PWC’s estimated The percentage distributions of mortgages for the years 1996 and later, in part because multifamily market shares are low is that a from these data sources are provided in Table the accuracy and completeness of CMBS data number of their calculations appear to D.11a. (Table D.11b will be discussed below.) expanded rapidly during this time period. include FHA and jumbo loans in estimating Because HMDA combines the first two The new methodology estimate of $34.5 the number of single-family units financed categories (SF–O and SF 2–4), the billion for 1996 is close to the revised SMLA each year. For example, in 1998, PWC comparisons between the data bases must estimate of $33.3 billion. Based on these two estimates the size of the single-family necessarily focus on the SF investor category. independent estimates, a likely range of $33– mortgage market at $1.5 trillion. This is According to 1997 (1998) HMDA data, 37 billion is selected. identical to the widely-used estimate by the investors account for 9.4 (9.0 percent) In 1997, the new methodology ($38.2 Mortgage Bankers Association (MBA) for the percent of home purchase loans and 7.4 billion ) and the revised SMLA figure ($35.5 entire single-family mortgage market that percent (5.5 percent) of refinance loans.33 billion) diverge slightly, but remain relatively year, including jumbo and FHA loans, as Assuming a 35 percent refinance rate per close to each other, and to Fannie Mae’s discussed previously. HUD’s market share HUD’s projection model, the 1997 (1998) estimate of $35–40 billion, in comparison calculations, in contrast, are based on the HMDA data are consistent with an investor with other methodological choices. In light of multifamily share of conventional share of 8.7 (7.8) percent. The RFS estimate these three, relatively consistent estimates, a conforming mortgage loans originated each of 17.3 percent is approximately twice the likely range of $36–40 billion is a reasonable year. HMDA estimates. In their comments, the choice for 1997. The multifamily share of the conforming GSEs argued that the HMDA-reported SF HUD’s new methodology generates a 1998 conventional market (or ‘‘multifamily mix’’) investor share of approximately 8 percent estimate of $52.9 billion, exceeding even derived from this discussion of multifamily should be used by HUD. In its 1995 rule as Freddie Mac’s estimate of $40–50 billion. origination volume is utilized below as part well as in this year’s proposed rule, HUD’s However, because of the careful avoidance of of HUD’s analysis of the share of units baseline model assumed a 10 percent share double-counting in construction of this financed each year meeting each of the for the SF investor group; alternative models methodology, it is difficult to see how housing goals. For purposes of that analysis, assuming 8 percent and 12 percent were also conventional multifamily volume could be a multifamily mix of 16.5 percent is considered. As discussed below, HUD’s less than $52.9 billion. Indeed, because of the reasonable, since it corresponds most closely baseline projection of 10 percent is probably discontinuation of the SMLA in 1998, the to the midpoint of the likely range of quite conservative; however, given the $52.9 billion new methodology estimate does estimates in Table D.10. However, a 15 uncertainty around the data, it is difficult to not include originations by pension funds or percent market share can be utilized as an draw firm conclusions about the size of the government credit agencies. Therefore, a alternative market share estimate single-family investor market, which likely range of $52–55 billion appears corresponding to a somewhat less favorable necessitates the sensitivity analysis that HUD reasonable. environment for multifamily lending. While conducts. somewhat low from an historical standpoint, Table D.10 concludes with estimates for 2. Analysis of Investor Market Share 1999 origination volume as well as a 15 percent mix more readily accommodates projections for 2000. The Federal Reserve the possibility of a recession or heavy Blackley and Follain Board of Governors has published data refinance year than would baseline During the 1995 rule-making, HUD asked indicating that net multifamily borrowing in assumptions based more strictly on historical the Urban Institute to analyze the differences 1999 was $42.4 billion.29 Because net data. In order to more fully consider the between the RFS and HMDA investor shares multifamily borrowing includes only effects of an even more adverse market and determine which was the more increases in the stock of indebtedness, it environments, an alternative multifamily mix reasonable. The Urban Institute’s analysis of assumption of 13.5 is also considered, as well excludes refinance loans, which are a this issue is contained in reports by Dixie as a number of others. significant component of the multifamily Blackley and James Follain. 34 Blackley and origination market. Hence, the Federal D. Single-Family Owner and Rental Follain provide reasons why HMDA should Reserve figure can be used as a lower bound Mortgage Market Shares be adjusted upward as well as reasons why for 1999 origination volume. Consequently, it the RFS should be adjusted downward. They would appear reasonable to reject the Fannie 1. Available Data find that HMDA may understate the investor Mae figure of $37–$41 billion for 1999 as As explained later, HUD’s market model share of single-family mortgages because of unrealistically low. Because it is based on will also use projections of mortgage ‘‘hidden investors’’ who falsely claim that a data regarding the multifamily mortgage originations on single-family (1–4 unit) property is owner-occupied in order to more market from 1991, the UI figure of $48.8 properties. Current mortgage origination data easily obtain mortgage financing. RFS may billion may not be valid. Of the four 1999 combine mortgage originations for the three overstate the investor share of the market estimates reported in Table D.10, the $44.5 different types of single-family properties: because units that are temporarily rented billion HUD figure appears to be the most owner-occupied, one-unit properties (SF–O); while the owner seeks another buyer may be reliable. Because this figure excludes several 2–4 unit rental properties (SF 2–4); and 1– counted as rental units in the RFS, even important conventional lending categories, 4 unit rental properties owned by investors though rental status of such units may only such as pension and retirement funds and (SF-Investor). The fact that the goal be temporary.
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Blackley and Follain also noted that the paper, they conclude that 12 percent is a represent 2.3 percent of all single-family fact that investor loans prepay at a faster rate reasonable estimate of the investor share of mortgages so the 2.0 percent assumption may than other single-family loans suggests that single-family mortgage originations. 36 be slightly conservative. Second, the the investor share of single-family mortgage Blackley and Follain caution that uncertainty resulting mortgage-based distributions were originations should be higher not lower than exists around this estimate because of shifted to unit-based distributions by the investor share of the single-family inadequate data. applying the following unit-per-mortgage housing stock. In comments, Freddie Mac questions this part of Follain and Blackely’s 3. Single-Family Market in Terms of Unit assumptions: 2.25 units per SF 2–4 property analysis. Shares and 1.35 units per SF investor property. Both The RFS’s investor share should be The market share estimates for the housing figures were derived from the 1991 RFS.37 adjusted downward in part because the RFS goals need to be expressed as percentages of Based on these calculations, the percentage assigns all vacant properties to the rental units rather than as percentages of mortgages. distribution of newly-mortgaged single group, but some of these are likely intended Thus, it is necessary to compare unit-based family dwelling units was derived for each of for the owner market, especially among one- distributions of the single-family mortgage the various estimates of the investor share of unit properties. Blackley and Follain’s market under the alternative estimates single-family mortgages (discussed earlier analysis of this issue suggests lowering the discussed so far. The mortgage-based and reported in Table D.11a). The results are distributions given in Table D.11a were investor share from 17.3 percent to about 14– presented in Table D.11b. Three points 15 percent. adjusted in two ways. First, the owner- should be made about these data. First, notice Finally, Blackley and Follain note that a occupied HMDA data were disaggregated conservative estimate of the SF investor share between SF–O and SF 2–4 mortgages by that the ‘‘SF-Rental’’ row highlights the share is advisable because of the difficulty of assuming that SF 2–4 mortgages account for of the single-family mortgage market measuring the magnitudes of the various 2.0 percent of all single-family mortgages; accounted for by all rental units. effects that they analyzed. 35 In their 1996 according to RFS data, SF 2–4 mortgages BILLING CODE 4210±27±P
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BILLING CODE 4210±27±C alternative is slightly above that in HUD’s projections made by HUD in 1995 appear Second, notice that the rental categories 1995 rule. Rental units account for 15.1 reasonable and, therefore, will serve as the represent a larger share of the unit-based percent of all newly financed single-family baseline assumption in the HUD’s market market than they did of the mortgage-based units under HUD’s baseline model, compared share model for this year’s final rule. market reported earlier. This, of course, with 13.5 (12.4) percent under a model based (2) HMDA likely underestimates the single- follows directly from applying the loan-per- on 1997 (1998) HMDA data. family rental mortgage market. Thus, this unit expansion factors. part of the HMDA data are not considered Third, notice that the rental share under 4. Conclusions reliable enough to use in computing the HMDA’s unit-based distribution is again This section has reviewed data and market shares for the housing goals. Various about one-half of the rental share under the analyses related to determining the rental sensitivity analyses of the market shares for RFS’s distribution. The rental share in HUD’s share of the single-family mortgage market. single-family rental properties are conducted 1995 rule and this year’s proposed rule is There are two main conclusions: in Sections F, G, and H. These sensitivity slightly larger than that reported by HMDA. (1) While there is uncertainty concerning analyses will include the GSEs’ The rental share in the ‘‘Blackley-Follain’’ the relative size of this market, the recommended model that assumes investors
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Alternative (MF-UNITS) financed by conventional 42 investor share of the single-family mortgage assumptions will be examined later. conforming multifamily originations is market. At that time, HUD will reconsider its Substituting these values into (1) yields an calculated by the following series of estimates of the investor share of the estimate for the conventional conforming equations: market (CCSFM$) of $645 billion. mortgage market. (5a) TOTAL = SF–UNITS + MF–UNITS Second, the number of conventional (5b) MF–UNITS = MF–MIX * TOTAL E. HUD’s Market Share Model conforming single-family mortgages This section integrates findings from the (CCSFM#) is derived as follows: = MF-MIX * (SF–UNITS + MF–UNITS) = [MF–MIX/(1–MF–MIX)] * SF–UNITS previous two sections about the size of the (2) CCSFM#=CCSFM$/SFLOAN$ Where MF–MIX = the ‘‘multifamily mix’’, or multifamily mortgage market and the relative Where SFLOAN$=the average conventional distribution of single-family owner and rental conforming mortgage amount for single- the percentage of all newly-mortgaged mortgages into a single model of the mortgage family properties; estimated to be dwelling units that are multifamily; as market. The section provides the basic $110,000.43 Substituting this value into discussed in Section C, alternative equations for HUD’s market share model and (2) yields an estimate of 5.9 million estimates of the multifamily market will identifies the remaining parameters that must mortgages. be included in the analysis. Section C be estimated. Third, the total number of single-family concludes that 15.0 percent and 16.5 The output of this section is a unit-based mortgages is divided among the three single- percent are reasonable projections for the distribution for the four property types family property types. Using the 88/2/10 year 2001–03. The baseline model 38 discussed in Section B. Sections F–H will percentage distribution for single-family assumes the more conservative of these apply goal percentages to this property mortgages (see Section D), the following two multifamily mixes—15 percent. distribution in order to determine the size of results are obtained: Assuming a multifamily mix of 15 percent the mortgage market for each of the three (3a) SF–OM#=.88*CCSFM# housing goals. and solving (5b) yields the following: =number of owner-occupied, one-unit (5c) MF–UNITS = [0.15/0.85] * SF–UNITS 1. Basic Equations for Determining Units mortgages = 0.176 * SF–UNITS Financed in the Mortgage Market =5.2 million. = 1.1 million. (3b) SF–2–4M#=.02*CCSFM# The model first estimates the number of =number of owner-occupied, two-to-four c. Total Units Financed dwelling units financed by conventional unit mortgages conforming mortgage originations for each of The total number of dwelling units =.1 million. financed by the conventional conforming the four property types. It then determines (3c) SF–INVM# =.10*CCSFM# each property type’s share of the total mortgage market (TOTAL) can be expressed =number of one-to-four unit investor in three useful ways: number of dwelling units financed. mortgages a. Single-Family Units =.6 million. (6a) TOTAL = SF–UNITS + MF–UNITS = Fourth, the number of dwelling units 7,308,558 This section estimates the number of (6b) TOTAL = SF–O + SF 2–4 + SF– single-family units that will be financed in financed for the three single-family property types is derived as follows: INVESTOR + MF–UNITS the conventional conforming market, where (6c) TOTAL = SF–O + SF–RENTAL + MF– (4a) SF–O=SF–OM#+SF–2–4M# single-family units (SF–UNITS) are defined UNITS as: =number of owner-occupied dwelling units Where SF–RENTAL equals SF–2–4 plus SF– SF–UNITS=SF–O+SF 2–4+SF–INVESTOR financed =5.3 million. INVESTOR. First, the dollar volume of conventional (4b) SF 2–4=1.25*SF–2–4M# conforming single-family mortgages 2. Dwelling Unit Distributions by Property =number of rental units in 2–4 properties Type (CCSFM$) is derived as follows: where a owner occupies one of the units (1) CCSFM$=CONF%*CONV%*SFORIG$ =.1 million.44 The next step is to express the number of Where (4c) SF–INVESTOR=1.35*SF–INVM# dwelling units financed for each property CONV%=conforming mortgage originations =number of single-family investor dwelling type as a percentage of the total number of (measured in dollars) as a percent of units financed units financed by conventional conforming conventional single-family originations; =.8 million. mortgage originations.45 estimated to be 87%.39 Fifth, summing equations 4a–4c gives the The projections used above in equations CONF%=conventional mortgage projected number of newly-mortgaged single- (1)–(6) produce the following distributions of originations as a percent of total family units (SF–UNITS): financed units by property type:
% Share % Share
SF±O ...... 72.2 ...... SF 2±4 ...... 2.0 SF±O ...... 46 72.2 SFINVESTOR ...... 10.8 SF±RENTER ...... 12.8 MF±UNITs ...... 15.0 MF±UNITS ...... 15.0 Total ...... 100.0 Total ...... 100.0
Sections C and D discussed alternative multifamily mix assumptions. Under a 16.5 similar to the baseline distribution in HUD’s projections for the mix of multifamily percent multifamily mix’the average mix 1995 final rule and in this year’s proposed originations and the investor share of single- during the 1990s—the newly-mortgaged unit rule. The analysis in sections F-H will focus family mortgages. This appendix will focus distribution would be 70.9 percent for Single- on goals-qualifying market shares for this on three multifamily mixes (13.5 percent, Family Owner, 12.6 percent for Single- property distribution as well as the one 15.0 percent, and 16.5 percent) but there will Family Renter, and 16.5 percent for presented above for the more conservative also be sensitivity analysis of other Multifamily-Units. This distribution is multifamily mix of 15 percent.
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The appendix will assume the following G–H will also consider market assumptions percent) to a high of 75.5 percent for the investor share of single-family other than the baseline assumptions. (multifamily mix of 13.5 percent coupled mortgages—8 percent, 10 percent, and 12 Table D.12 reports the unit-based with an investor mortgage share of 8 percent). percent. The middle value (10 percent distributions produced by HUD’s market The owner share under the baseline investor share) is used in the above share model for different combinations of projections (15 percent mix and 10 percent calculations and will be considered the these projections. The effects of the different investor) is 72.2 percent, which is slightly ‘‘baseline’’ projection throughout the projections can best be seen by examining the appendix. However, HUD recognizes the owner category which varies by 6.6 higher than the owner share (71.0 percent) in uncertainty of projecting origination volume percentage points, from a low of 68.9 percent the baseline projection of HUD’s 1995 rule in markets such as single-family investor (multifamily mix of 16.5 percent coupled and this year’s proposed rule. properties; therefore, the analysis in Sections with an investor mortgage share of 12 BILLING CODE 4210±27±P
BILLING CODE 4210±27±C distributions directly comparable to those recently acquired conventional conforming Comparison with the RFS. The Residential reported in Table D.12. Based on RFS data for mortgages, 56.5 percent were owner- Finance Survey is the only mortgage data 1987 to 1991, HUD estimated that, of total occupied units, 17.9 percent were single- source that provides unit-based property dwelling units in properties financed by family rental units, and 25.6 percent were
VerDate 112000 18:02 Oct 30, 2000 Jkt 194001 PO 00000 Frm 00163 Fmt 4701 Sfmt 4700 E:\FR\FM\31OCR2.SGM pfrm08 PsN: 31OCR2 65206 Federal Register / Vol. 65, No. 211 / Tuesday, October 31, 2000 / Rules and Regulations multifamily rental units.47 Thus, the RFS percentages for owners and renters are mortgage market is the income distribution of presents a much lower owner share than does discussed in the first two subsections. Then, single-family borrowers. HMDA reports HUD’s model. This difference is due mainly estimates of the size of the low- and annual income data for families who live in to the relatively high level of multifamily moderate-income market are presented along metropolitan areas and purchase a home or with several sensitivity analyses. Based on originations (relative to single-family refinance their existing mortgage.49 Table originations) during the mid-to late-1980s, these analyses, HUD concludes that 50–55 D.13 gives the percentage of mortgages which is the period covered by the RFS.48 As percent is a reasonable estimate of the noted earlier, the RFS based on the year 2000 mortgage market’s low- and moderate-income originated for low- and moderate-income census should clarify issues related to the share for the years (2001–2003) when the families for the years 1992–1998. Data for rental segment of the mortgage market. new goals will be in effect. home purchase and refinance loans are This rule establishes that the Low- and presented separately; the discussion will F. Size of the Conventional Conforming Moderate-Income Goal at 50 percent of focus on home purchase loans because they Mortgage Market Serving Low- and eligible units financed in each of calendar typically account for the majority of all Moderate-Income Families years 2001–2003. single-family owner mortgages. For each HMDA data for 1999 was not released until This section estimates the size of the low- year, a low- and moderate-income percentage August 2000, thus it was not available at the and moderate-income market by applying is also reported for the conforming market low- and moderate-income percentages to the time this rule was prepared. without loans originated by lenders that property shares given in Table D.12. This 1. Low- and Moderate-Income Percentage for primarily originate manufactured home loans section essentially accomplishes Steps 2 and Single-Family Owner Mortgages 3 of the three-step procedure discussed in (discussed below) in metropolitan areas. Section A.2.b. a. HMDA Data BILLING CODE 4210±27±P Technical issues and data adjustments The most important determinant of the related to the low- and moderate-income low- and moderate-income share of the
BILLING CODE 4210±27±C component of the special affordable mortgage the other related to the different borrower Table D.13 also reports similar data for market. income distributions for refinance and home very-low-income families (that is, families Two trends in the income data should be purchase mortgages. with incomes less than 60 percent of area mentioned—one related to the market’s Low-Mod Market Share Since 1995. As median income). As discussed in Section H, funding of low- and moderate-income discussed in the 1995 rule, the percentage of very-low-income families are the main families since the 1995 rule was written and borrowers with less than area median income
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Over the next four years refinancing activity, the low-mod share for foundations suggest that the percentage of (1995–98), the low-mod share of the home refinance mortgages was about the same as manufactured homes that would qualify as purchase market remained at a high level, that for home purchase mortgages. In 1997, real estate loans under GSE guidelines has averaging about 42 percent, or almost 40 the low-mod share of refinance mortgages grown in the past few years. There has also percent if manufactured loans are excluded (45.0) was even higher than the low-mod been a major shift from single-section homes from the market totals. The share of the share of home loans (42.5 percent). to multisection homes, which contain two or market accounted for by very-low-income The projection model assumes that three units which are joined together on site. borrowers followed a similar trend, refinancing will be 35 percent of the single- Although manufactured home loans cannot increasing from 8.7 percent in 1992 to 11.9 family mortgage market. However given the be identified in the HMDA data, HUD staff percent in 1994 and then remaining at a high volatility of refinance rates from year to year, have identified 22 lenders that primarily level through 1998. As discussed in it is important to conduct sensitivity tests originate manufactured home loans and Appendix A, this jump in low-income using different refinance rates. likely account for most of these loans in the lending has been attributed to several factors, b. Manufactured Housing Loans HMDA data for metropolitan areas. In Table including a favorable economy accompanied D.13, the data presented under ‘‘Conforming by historically low interest rates; the entry The mortgage market definition in this Market Without Manufactured Home Loans’’ into the housing market of more diverse appendix includes manufactured housing excludes loans originated by manufactured 50 groups including non-traditional households loans, which have become an important housing lenders, as well as loans less than (e.g., singles), immigrants, and minority source of affordable housing and which the $15,000. The lenders include companies families seeking homeownership for the first GSEs have started to purchase. Because the such as Green Tree Financial; Vanderbilt time; and affordable lending initiatives and market estimates in HUD’s 1995 rule were Mortgage; Deutsche Financial Capital; outreach efforts on the part of the mortgage adjusted to exclude manufactured housing Oakwood Acceptance Corporation; Allied industry. Essentially, the affordable lending loans, several tables in this appendix will Acceptance Corporation; Belgravia Financial market is much stronger than it appeared to show how the goals-qualifying shares of the Services; Ford Consumer Finance Company; single-family-owner market change be when HUD wrote the 1995 rule. At that and the CIT Group.53 depending on the treatment of manufactured time, there had been two years (1993 and housing loans. As explained later, the effect c. American Housing Survey Data 1994) of increasing affordable lending for of manufactured housing on HUD’s The American Housing Survey also reports lower-income borrowers. The four additional metropolitan area market estimate for each of borrower income data similar to that reported years of data for 1995–98 show more clearly the three housing goals is a modest one in Table D.3. The low- and moderate-income the underlying strength of this market. percentage point market shares from the AHS are as follows: It is recognized that lending patterns could As discussed in Appendix A, the 1985 27.0% change with sharp changes in the economy. manufactured housing market has been 1987 32.0% However, the fact that there have been six increasing rapidly over the past few years, as 1989 34.0% years (1993–98) of strong affordable lending sales volume has increased from $4.7 billion 1991 36.0% suggests the market may have changed in in 1991 to $15.3 billion in 1999. The 1993 33.0% (38.7% home purchase and fundamental ways from the mortgage market affordability of manufactured homes for 28.6% refinance) of the early 1990s. The numerous innovative lower-income families is demonstrated by 1995 40.0% (38.5% home purchase and products and outreach programs that the their average price of $44,000 in 1999, a 43.2% refinance) industry has developed to attract lower- fraction of the $196,000 for new homes and According to the AHS, 38.5 percent of income families into the homeownership and $168,000 for existing homes. Many those families surveyed during 1995 who had mortgage markets appear to be working and households live in manufactured housing recently purchased their homes, and who there is no reason to believe that they will because they simply cannot afford site-built obtained conventional mortgages below the not continue to assist in closing troubling homes, for which the construction costs per conforming loan limit, had incomes below homeownership gaps that exist today. As square foot are much higher. the area median; this compares with 39.3 explained in Appendix A, the demand for Data on the incomes of purchasers of percent based on 1995 HMDA data that homeownership on the part of non- manufactured homes is not readily available, excludes manufactured homes (as the AHS traditional borrowers, minorities, and but HMDA data on home loans made by 22 data do). immigrants should help to maintain activity lenders that primarily originate A longer-term perspective of the mortgage in the affordable portion of the mortgage manufactured home loans, discussed below, market can be gained by examining income market. Thus, while economic recession or indicate that: 51 data from the last six American Housing higher interest rates would likely reduce the • A very high percentage of these loans— Surveys. During the earlier period between low- and moderate-income share of mortgage 76 percent in 1998—would qualify for the 1987 and 1991, the low- and moderate- originations, there is evidence that the low- Low- and Moderate-Income Goal, income share increased from 27 percent to 36 mod market might not return to the low • A substantial percentage of these loans— percent, and averaged 32.3 percent. After levels of the early 1990s. 42 percent in 1998—would qualify for the remaining at a relatively low percentage (33.0 Refinance Mortgages. HUD’s model for Special Affordable Goal, and percent) during the heavy refinance year of determining the size of the low- and • Almost half of these loans—47 percent in 1993, the low- and moderate-income share moderate-income market assumes that low- 1998—would qualify for the Underserved rebounded to 40.0 percent in 1995. As noted mod borrowers will represent a smaller share Areas Goal. earlier, this is about the same market share of refinance mortgages than they do of home Thus an enhanced presence in this market reported by HMDA data for 1995. purchase mortgages. However, as shown in by the GSEs would benefit many lower- The GSEs have raised issues concerning Table D.4, the income characteristics of income families. It would also contribute to underreporting of income in the AHS.54 borrowers refinancing mortgages seem to their presence in underserved rural areas, Since HMDA data cover over 80 percent of depend on the overall level of refinancing in especially in the South. the single-family-owner mortgage market, the market. During the refinancing wave of To date the GSEs have played a minimal and the American Housing Survey represents 1992 and 1993, refinancing borrowers had role in the manufactured home loan market, only a very small sample of this market, the much higher incomes than borrowers but both enterprises have expressed an HMDA data will be the source of information purchasing homes. For example, during 1993 interest in expanding their roles.52 Except in on the characteristics of single-family low- and moderate-income borrowers structured transactions, the GSEs do not property owners receiving mortgage accounted for 29.3 percent of refinance purchase manufactured housing loans under financing. As discussed next, the American mortgages, compared to 38.9 percent of home their seller/servicer guidelines unless they Housing Survey and the Property Owners purchase borrowers. In 1998, another period are real estate loans. That is, such homes and Managers Survey will be relied on for of high refinance activity, low- and moderate- must have a permanent foundation and the information about the rents and affordability
VerDate 112000 18:02 Oct 30, 2000 Jkt 194001 PO 00000 Frm 00165 Fmt 4701 Sfmt 4700 E:\FR\FM\31OCR2.SGM pfrm08 PsN: 31OCR2 65208 Federal Register / Vol. 65, No. 211 / Tuesday, October 31, 2000 / Rules and Regulations of single-family and multifamily rental properties; rather, it includes data on the reason, it is appropriate to base estimates of properties. characteristics of the existing rental housing market size on rent affordability data rather stock and recently completed rental than on renter income data. 2. Low- and Moderate-Income Percentage for properties. Current data on the income of A rental unit is considered to be Renter Mortgages prospective or actual tenants has also not ‘‘affordable’’ to low- and moderate-income The 1995 rule relied on the American been readily available for rental properties. families, and thus qualifies for the Low- and Housing Survey for a measure of the rent Where such income information is not Moderate-Income Goal, if that unit’s rent is affordability of the single-family rental stock available, FHEFSSA provides that the rent of equal to or less than 30 percent of area and the multifamily rental stock. As a unit can be used to determine the median income. Table D.14 presents AHS explained below, the AHS provides rent affordability of that unit and whether it data on the affordability of the rental housing information for the stock of rental properties qualifies for the Low- and Moderate-Income stock for the survey years between 1985 and rather than for the flow of mortgages Goal. A unit qualifies for the Low- and 1997. The 1997 AHS shows that for 1–4 unit financing that stock. This section discusses a Moderate-Income Goal if the rent does not unsubsidized single-family rental properties, new survey, the Property Owners and exceed 30 percent of the local area median 94 percent of all units and of units Managers Survey (POMS), that provides income (with appropriate adjustments for constructed in the preceding three years had information on the flow of mortgages family size as measured by the number of gross rent (contract rent plus the cost of all financing rental properties. As discussed bedrooms). Thus, the GSEs’ performance utilities) less than or equal to 30 percent of below, the AHS and POMS data provide very area median income. For multifamily similar estimates of the low- and moderate- under the housing goals is measured in terms unsubsidized rental properties, the income share of the rental market. of the affordability of the rental dwelling units that are financed by mortgages that the corresponding figure was 92 percent. The a. American Housing Survey Data GSEs purchase; the income of the occupants AHS data for 1989, 1991, 1993, and 1995 are The American Housing Survey does not of these rental units is not considered in the similar to the 1997 data. include data on mortgages for rental calculation of goal performance. For this BILLING CODE 4210±27±P
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BILLING CODE 4210±27±C
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Observations where neither necessary background by comparing HUD’s HUD conducted an analysis of this issue monthly housing cost nor monthly rent was estimate made during the 1995 rule-making using the Residential Finance Survey and available were omitted, as were observations process with actual experience between 1995 concluded that the existing stock was an where MSA could not be determined. Units and 1998. Subsection 3.b presents new adequate proxy for the mortgage flow when with no cash rent and subsidized housing estimates of the low-mod market while rent affordability is defined in terms of less units were also omitted. Because of the Subsection 3.c reports the sensitivity of the than 30 percent of area median income, shortage of observations with 1995 new estimates to changes in assumptions which is the affordability definition for the originations, POMS data on year of mortgage about economic and mortgage market Low- and Moderate-Income Goal. More origination were utilized to restrict the conditions. specifically, that analysis suggested that 85 a. Comparison of Market Estimates With percent of single-family rental units and 90 sample to properties mortgaged during 1993– Actual Performance percent of multifamily units are reasonable 1995. POMS weights were then applied to estimates for projecting the percentage of estimate population statistics. Affordability The market share estimates that HUD made financed units affordable at the low- and calculations were made using 1993–95 area during 1995 can now be compared with moderate-income level.56 HUD has median incomes calculated by HUD. actual market shares for 1995 to 1998. This investigated this issue further using the POMS Results. The rent affordability discussion of the accuracy of HUD’s past POMS. estimates from POMS of the affordability of market estimates considers all three housing POMS Methodology. The affordability of newly-mortgaged rental properties are quite goals, since the explanations for the multifamily and single-family rental housing consistent with the AHS data reported in differences between the estimated and actual backing mortgages originated in 1993–1995 Table D.5 on the affordability of the rental market shares are common across the three was calculated using internal Census Bureau stock. Ninety-six (96) percent of single-family goals. HUD estimated the market for each files from the American Housing Survey- rental properties with new mortgages housing goal for 1995–98, and obtained the 57 National Sample (AHS) from 1995 and the between 1993 and 1995 were affordable to results reported in Table D.15. B&C loans are not included in the market estimates Property Owners and Managers Survey from low- and moderate-income families, and 56 reported in Table D.15. The discussion of 1995–1996. The POMS survey was percent were affordable to very-low-income conducted on the same units included in the Table D.15 will proceed as follows. It will families. The corresponding percentages for AHS survey, and provides supplemental first focus on the market estimates for 1995 newly-mortgaged multifamily properties are information such as the origination year of to 1997 which are the most useful the mortgage loan, if any, recorded against 96 percent and 51 percent, respectively. comparisons with HUD’s market estimates the property included in the AHS survey. Thus, these percentages for newly-mortgaged from the 1995 rule. The discussion will then Monthly housing cost data (including rent properties from the POMS are similar to examine the market estimates for the heavy and utilities), number of bedrooms, and those from the AHS for the rental stock. As refinance year of 1998. After that, HUD’s metropolitan area (MSA) location data were discussed in the next section, the baseline method for adjusting the 1995–98 market obtained from the AHS file. projection from HUD’s market share model data to exclude B&C loans as well as the non- In cases where units in the AHS were not assumes that 90 percent of newly-mortgaged, metropolitan area adjusted market for the occupied, the AHS typically provides rents, single-family rental and multifamily units are Underserved Areas Goal will be explained. either by obtaining this information from affordable to low- and moderate-income (See Table D.15) property owners or through the use of families. BILLING CODE 4210±27±P
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BILLING CODE 4210±27±C for the special affordable estimate, 23 versus almost 44 percent of all (home purchase and HUD’s market estimates in 1995 were 48– 28–29 percent, and for the underserved areas refinance) single-family-owner mortgages 52 percent for the Low- and Moderate- estimate, 28 percent versus 33–34 percent. qualified for the Low- and Moderate-Income Income Goal, 20–23 percent for the Special There are several factors explaining HUD’s Goal, 16 percent qualified for the Special Affordable Goal, and 25–28 percent for the underestimate of the goals-qualifying market Affordable Goal, and 28 percent qualified for Underserved Areas Goal. Thus, even the shares. The 1995–97 mortgage markets the Underserved Areas Goal.58 HUD’s 1995 upper bound figures for the market share originated more affordable single-family estimates anticipated smaller shares of new ranges in the 1995 rule proved to be low for mortgages than anticipated, mainly due to the 1995–97 period—for the low-mod historically low interest rates and strong mortgages being originated for low-income 59 60 estimate, 52 percent versus 57–58 percent; economic expansion. In 1997, for instance, families and in their neighborhoods.
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The financing of multifamily properties goals-qualifying percentages to the estimated fact, this rental mix effect would come into during 1995–97 was larger than anticipated. B&C market total of 732,182 gives the play with any reduction in owner units from HUD’s earlier estimates assumed a following estimates of B&C loans that HUD’s model. multifamily share of 16 percent, which was qualified for each of the housing goals in There are caveats that should be mentioned lower than the approximately 19 percent 1997: Low- and Moderate Income (419,540), concerning the above adjustments for the multifamily share for the years 1995–97. The Special Affordable (205,743), and B&C market for 1997. The adjustment for underestimate for the multifamily share was Underserved Areas (327,286). B&C loans depends on several estimates due both to a larger multifamily dollar Adjusting HUD’s model to exclude the B&C relating to the 1997 mortgage market, derived volume ($34 billion for 1995, $37 billion for market involves subtracting the above four from various sources. Different estimates of 1996, and $38 billion for 1997) than figures’ one for the overall B&C market and the size of the B&C market in 1997 or the anticipated in the 1995 GSE rule ($30 billion) three for B&C loans that qualify for each of goals-qualifying shares of the B&C market and to lower per unit multifamily loan the three housing goals—from the could lead to different estimates of the goals- amounts than assumed in HUD’s earlier corresponding figures estimated by HUD for qualifying shares for the overall market. The model.61 the total single-family and multifamily goals-qualifying shares of the B&C market B&C Mortgages. As discussed in Appendix market inclusive of B&C loans. HUD’s model were based on HMDA data for selected A, the market for subprime mortgages has estimates that 8,039,132 single-family and lenders that primarily originate subprime experienced rapid growth over the past 2–3 multifamily units were financed during 1997; loans; since these lenders are likely years. Table D.15 provides goals-qualifying of these, 4,620,828 (57.5 percent) qualified originating both A-minus and B&C loans, the market shares that exclude the B&C portion for the Low- and Moderate-Income Goal, goals-qualifying percentages used here may of the subprime market. This section explains 2,311,251 (28.8 percent) for the Special not be accurately measuring the goals- how these ‘‘adjusted’’ market shares are Affordable Goal, and 2,694,351 (33.5 percent) qualifying percentages for only B&C loans. calculated from ‘‘unadjusted’’ market shares for the Underserved Areas Goal. Deducting The above technique of dropping B&C loans that include B&C loans, using the year 1997 the B&C market estimates produces the also assumes that the coverage of B&C and as an example. Comprehensive data for following adjusted market estimates: a total non-B&C loans in HMDA’s metropolitan area measuring the size of the subprime market market of 7,306,950, of which 4,201,287 (57.5 data is the same; however, it is likely that are not available. However, estimates by percent) qualified for the Low- and Moderate- HMDA coverage of non-B&C loans is higher various industry observers suggest that the Income Goal, 2,105,508 (28.8 percent) for the than its coverage of B&C loans.65 Despite subprime market could have accounted for as Special Affordable Goal, and 2,367,066 (32.4 these caveats, it also appears that reasonably much as 15 percent of all mortgages percent) for the Underserved Areas Goal. different estimates of the various market originated during 1997, which would have As seen, the low-mod market share parameters would not likely change, in any amounted to approximately $125 billion.62 In estimate exclusive of B&C loans (57.5 significant way, the above estimates of the terms of credit risk, this $125 billion includes percent) is the same as the original market effects of excluding B&C loans in calculating a wide range of mortgage types. ‘‘A-minus’’ estimate (57.5 percent) and the the goals-qualifying shares of the market. As loans, which represented at least half of the corresponding special affordable market discussed below, HUD provides a range of subprime market in 1997, make up the least estimate (28.8 percent) is also the same as the estimates for the goals-qualifying market risky category. As discussed in Appendix A, original estimate. This occurs because the shares to account for uncertainty related to the GSEs are involved in this market both B&C loans that were dropped from the the various parameters included in its through specific program offerings and analysis had similar low-mod and special projection model for the mortgage market. through purchases of securities backed by affordable percentages as the overall (both Adjustment for Non-Metropolitan Areas. subprime loans (including B&C loans). The single-family and multifamily) market. For The first set of 1995–98 market shares for B&C loans experience much higher example, the low-mod share of B&C loans underserved areas is based on single-family- delinquency rates than A-minus loans.63 was projected to be 57.3 percent and HUD’s owner parameters for metropolitan areas. It is The procedure for excluding B&C market model projected the overall low-mod necessary to adjust these market shares mortgages from estimated ‘‘unadjusted’’ share to be 57.5 percent. Thus, dropping B&C upward by about 1.5 percentage points to market shares for goals-qualifying loans in loans from the market totals does not change reflect the fact that underserved counties 1997 combined information from several the overall low-mod share of the market. account for a much larger portion of non- sources. First, the $125 billion estimate for The situation is different for the metropolitan areas than underserved census the subprime market was reduced by 20 Underserved Areas Goal. Underserved areas tracts do metropolitan areas. The method for percent to arrive at an estimate of $100 account for 44.7 percent of the B&C loans, deriving the 1.5 percentage point adjustment billion for subprime loans that were less than which is a higher percentage than the is explained in Section G.3 below, which the conforming loan limit of $214,600 in underserved area share of the overall market presents the projected 2001–03 market 1997. This figure was reduced by one-half to (33.5 percent). Thus, dropping the B&C loans estimates for the Underserved Areas Goal. arrive at an estimate of $50 billion for the leads to a reduction in the underserved areas 1998 Market Estimates. The high volume of conforming B&C market; with an average market share of 1.1 percentage points, from single-family mortgages in the heavy loan amount of $68,289 (obtained from 33.5 percent to 32.4 percent. refinance year of 1998 increased the share of single-family-owner units to 73.1 percent, HMDA data, as discussed below), the $50 Dropping B&C loans from HUD’s model compared with 68–70 percent for 1995 to billion represented approximately 732,182 changes the mix between rental and owner 1997. This shift toward single-family loans, B&C loans originated during 1997 under the units in the final market estimate. Based on combined with the higher level of single- conforming loan limit. assumptions about the size of the owner and family refinance activity in 1998, results in HMDA data was used to provide an rental markets for 1997, HUD’s model market shares that are slightly smaller than estimate of the portion of these 732,182 B&C calculates that single-family-owner units reported for 1995–97. The following loans that would qualify for each of the accounted for 70.2 percent of total units estimates are obtained: low-mod, 53.8 housing goals. HMDA data does not identify financed during 1997. Dropping the B&C percent; special affordable, 25.8 percent; and subprime loans, much less divide them into owner loans, as described above, reduces the underserved areas, 30.9 percent.66 While their A-minus and B&C components. As owner percentage of the market by three lower, these estimates remain higher than the explained in Appendix A, Randall percentage points to 67.2 percent. Thus, market estimates that HUD made in 1995 (see Scheessele in HUD’s Office of Policy another way of explaining why the goals- earlier discussion for reasons). Development and Research has identified qualifying market shares are not affected so 200 HMDA reporters that primarily originate much by dropping B&C loans is that the b. Market Estimates subprime loans. The goals-qualifying rental share of the overall market increases as This section provides HUD’s estimates for percentages of the loans originated by these the B&C owner units are dropped from the the size of the low-and moderate-income subprime lenders in 1997 were as follows: market. Since rental units have very high mortgage market that will serve as a proxy for 57.3 percent qualified for the Low- and goals-qualifying percentages, their increased the four-year period (2001–2003) when the Moderate-Income Goal, 28.1 percent for the importance in the market partially offsets the new housing goals will be in effect. Three Special Affordable Goal, and 44.7 percent for negative effects on the goals-qualifying shares alternative sets of projections about property the Underserved Areas Goal.64 Applying the of any reductions in B&C owner loans. In shares and rental property low-and moderate-
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BILLING CODE 4210±27±C average multifamily share between 1991 and approach recognizes that there is some Because single-family-owner units account 1998, while 15 percent represents a slightly uncertainty in the data and that there can be for about 70 percent of all newly mortgaged more conservative baseline. different viewpoints about the various market dwelling units, the low- and moderate- Several low-mod percentages of the owner definitions and other model parameters. income percentage for owners is the most market are given in Table D.17 to account for With respect to excluding B&C loans from important determinant of the total market different perceptions about the low-mod the market estimates, Table D.17 can be estimate.67 Thus, Table D.17 provides market share of that market. Essentially, HUD’s interpreted in two ways. First, readers could estimates for different low-mod percentages approach throughout this appendix is to choose a home purchase low-mod percentage for the owner market as well as for different provide several sensitivity analyses to (that is, one of the percentages in the first multifamily mix percentages—the 15.0 illustrate the effects of different views about column) that they believe is adjusted for B&C percent projection bracketed by 13.5 percent the goals-qualifying share of the single- loans and then obtain a rough estimate of the and 16.5 percent. As discussed in Section C family-owner market on the goals-qualifying overall low-mod estimate from the second to of this appendix, 16.5 percent represents the share of the overall mortgage market. This fourth columns corresponding to different
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Thus, by taking the 1992–98 reader thinks are appropriate) is 39 percent, family rental market and lower low- and average low-mod differential between home then the low-mod market estimate is 52.4 moderate-income percentages for rental purchase and refinance loans, the projection percent assuming a multifamily mix of 15 properties result in the Case 2 estimates model deviates from 1995–97 conditions in percent. Second, readers could choose a being almost two percentage points below the the single-family owner market.71 home purchase percentage directly from Case 1 estimates. Conversely, the higher The effects of deducting the B&C loans HMDA data that is unadjusted for B&C loans percentages under Case 3 result in estimates from the projection model can be illustrated and then rely on HUD’s methodology of the low-mod market approximately three using the above example of a low-mod home (described below) for excluding B&C loans percentage points higher than the baseline purchase percentage of 42 percent and a low- from the market estimates reported in Table estimates. mod refinance percentage of 39 percent; as D.17. The advantage of the second approach The various market estimates presented in Table D.17 shows, this translates into an is that HUD’s methodology makes the Table D.17 are not all equally likely. Most of overall low-mod market share of 54.6 appropriate adjustments to the various them equal or exceed 51 percent; in the percent. It is assumed that the subprime property shares (i.e., the owner versus rental baseline model, estimates below 51 percent market accounts for 12 percent of all percentages) due to excluding B&C owner would require the low-mod share of the mortgages originated, which would be $114 loans from the analysis. According to HUD’s single-family owner market for home billion based on $827 billion for the methodology, dropping B&C owner loans purchase loans to drop to approximately 36 conventional market. This $114 billion would reduce the various low-mod market percent which would be over six percentage estimate for the subprime market is reduced estimates reported in Table D.17 by less than points lower than the 1993–98 average for the by 20 percent to arrive at $91 billion for half of a percentage point. This minor effect low-mod share of the home purchase market. subprime loans that will be less than the is due to (a) the fact that the low-mod share With a multifamily mix at 13.5 percent, the conforming loan limit. This figure is reduced of B&C loans is similar to that of the overall low-mod share of the owner market can fall by one-half to arrive at approximately $46 market; and (b) the offsetting effects of the to 36 percent before the average market share billion for the conforming B&C market; with increase in the rental share when B&C owner falls below 50 percent. an average loan amount of $82,022; the $46 loans are dropped from the market totals. For The upper bound (56 percent) of the low- billion represents 556,000 B&C loans this reason, the low-mod market estimates mod estimates reported in Table D.17 for the projected to be originated under the reported in Table D.17 provide a reasonable baseline case is lower than the low-mod conforming loan limit.72 proxy for low-mod market estimates without share of the market between 1995 and 1997. Following the procedure discussed in B&C loans. This issue is discussed in more As reported above, HUD estimates that the Section F.3.a, the low-mod share of the detail below. low-mod market share during this period was market exclusive of B&C loans is estimated As shown in Table D.17, the market about 57 percent. There are two reasons the to be 54.3 percent, which is only slightly estimate is 53–56 percent if the owner projected low-mod estimates are lower than lower than the original estimate (54.6 percentage is at or above 40 percent (slightly the 1995–97 experience. First, the projected percent).73 As noted earlier, this occurs less than its 1994–98 levels), and it is 52–53 rental share of 28 percent is lower than the because the B&C loans that were dropped percent if the owner percentage is 39 percent rental share of 31 percent for the 1995–97 from the analysis had similar low-mod (its 1993 level). If the low- and moderate- period; a smaller market share for rental units percentages as the overall (both single family income percentage for owners fell from its lowers the low-mod market share. Second, and multifamily) market (59.3 percent and 1997–98 level of 43 percent to 35 percent, the HUD’s projections assume that refinancing 55.7 percent, respectively). The impact of overall market estimate would be borrowers will have higher incomes than dropping B&C loans is larger when the approximately 50 percent. Thus, 50 percent borrowers purchasing a home (explained overall market share for low-mod loans is is consistent with a rather significant decline below). As Table D.14 shows, this was the smaller. As shown in Table D.17, a 38 in the low-mod share of the single-family reverse of the situation between 1995 and percent low-mod share for single-family home purchase market. Under the baseline 1997 when refinancing borrowers had higher owners is associated with an overall low-mod projection, the home purchase percentage incomes than borrowers purchasing a share of 51.7 percent. In this case, dropping can fall as low as 34 percent—about four- home. 69 This fact, along with the larger B&C loans would reduce the low-mod market fifths of the 1997–98 level—and the low- and single-family mix effect, resulted in the low- share by 0.5 percentage point to 51.2 percent. moderate-income market share would still be mod share of the market falling below the Still, dropping B&C loans from the market 49 percent. 1997 level of 57 percent. totals does not change the overall low-mod The volume of multifamily activity is an B&C Loans. As discussed above, if one share of the market appreciably. important determinant of the size of the low- assumes the home purchase percentages in Dropping B&C loans from HUD’s projection and moderate-income market. HUD is aware the first column of Table D.17 are unadjusted model changes the mix between rental and of the uncertainty surrounding projections of for B&C loans, then the overall low-mod owner units in the final market estimate; the multifamily market and consequently market estimates must be adjusted to exclude rental units accounted for 30.1 percent of recognizes the need to conduct sensitivity these loans. B&C loans can be deducted from total units after dropping B&C loans analyses to determine the effects on the HUD’s low-mod market estimates using the compared with 27.8 percent before dropping overall market estimate of different same procedure described earlier. But before B&C loans. Since practically all rental units assumptions about the size of that market. As doing that, some additional comments about qualify for the low-mod goal, their increased discussed in Section E.2, the multifamily mix how HUD’s projection model operates are in importance in the market partially offsets the assumption of 15 percent produces an overall order. HUD’s projection model assumes that negative effects on the goals-qualifying shares (both multifamily and single-family) rental the low-mod share of refinance loans will be of any reductions in B&C owner loans. mix of 27.8 percent, which is about a three percentage points lower than the low- Section F.3.a discussed several caveats percentage point less than the overall rental mod share of home purchase loans, even concerning the analysis of B&C loans. It is mix projection in HUD’s 1995 rule. Lowering though there have been years recently (1995– not clear what types of loans (e.g., first versus the multifamily mix to 13.5 produces the set 97) when the low-mod share of refinance second mortgages) are included in the B&C of overall low-mod market estimates that are loans has been as high or higher than that for market estimates. There is only limited data reported in the first column of Table D.17. home purchase loans (see Table D.14).70 on the borrower characteristics of B&C loans Compared with 15 percent, the 13.5 percent Since B&C loans are primarily refinance and the extent to which these loans are mix assumption reduces the overall low-mod loans, this assumption of a lower low-mod included in HMDA is not clear. Still, the market estimates by slightly over a half share for refinance loans partially adjusts for analysis of Table D.17 and the above analysis percentage point. For example, when the the effects of B&C loans, based on 1995–97 of the effects of dropping B&C loans from the low-mod share of the owner market is 42 market conditions. For example, in Table market suggest that 50–55 percent is a percent, the low-mod share of the overall D.17, the low-mod home purchase percentage reasonable range of estimates for the low- and market is 54.6 percent assuming a 15 percent of 43 percent, which reflects 1997 conditions, moderate-income market for the years 2001–
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2003. This range covers markets without B&C HUD conducted numerous sensitivity goal, HUD must determine ‘‘whether (taking loans and allows for market environments analyses of the market shares. In the into consideration market and economic that would be much less affordable than projection model, increasing the single- conditions and the financial condition of the recent market conditions. The next section family mortgage origination forecast while enterprise) the achievement of the housing presents additional analyses related to holding the multifamily origination forecast goal was or is feasible.’’ This provision of market volatility and affordability conditions. constant is equivalent to reducing the FHEFSSA clearly allows for a finding by multifamily mix. Increasing the single-family c. Economic Conditions, Market Estimates, HUD that a goal was not feasible due to projection by $100 billion, from $950 billion and the Feasibility of the Low- and Moderate- market conditions, and no subsequent to $1,050 billion, would reduce the market Income Housing Goal actions would be taken. As HUD noted in the share for the Low-and Moderate-Income Goal 1995 GSE rule, it does not set the housing During the 1995 rule-making, there was a by approximately 0.5 percentage point, goals so that they can be met even under the concern that the market share estimates and assuming the other baseline assumptions worst of circumstances. Rather, as explained the housing goals failed to recognize the remain unchanged.74 A $200 billion increase above, HUD has conducted numerous volatility of housing markets and the would reduce the low-mod projected market sensitivity analyses for economic existence of macroeconomic cycles. There share by 0.9 percentage point. environments much more adverse than has was particular concern that the market shares HUD also examined potential changes in existed in recent years. If macroeconomic and housing goals were based on a period of the market shares under very different conditions change even more dramatically, economic expansion accompanied by record macroeconomic environments, one assuming the levels of the goals can be revised to low interest rates and high housing a recession and one assuming a period of low reflect the changed conditions. FHEFSSA affordability. As discussed in Section B of interest rates and heavy refinancing. The and HUD recognize that conditions could this appendix, the GSEs expressed similar recessionary environment was simulated change in ways that require revised concerns in their comments on this year’s using Fannie Mae’s minimum projections of expectations. proposed rule. This section discusses these single-family mortgage originations ($880 Affordability Conditions and Market issues, noting that the Secretary can consider billion). The low- and moderate-income Estimates. The market share estimates rely on shifts in economic conditions when share of the home purchase market was 1992–1998 HMDA data for the percentage of evaluating the performance of the GSEs on reduced to 34 percent, or 8.5 percentage low- and moderate-income borrowers. As the goals, and noting further that the market points lower than its 1997 share.75 Under discussed in Appendix A, record low interest share estimates can be examined in terms of these rather severe conditions, the overall rates, a more diverse socioeconomic group of less favorable market conditions than existed market share for the Low- and Moderate- households seeking homeownership, and during the 1993 to 1998 period. Income Goal would decline to 50.4 percent. affordability initiatives of the private sector Volatility of Market. The starting point for If the low-mod share of the owner market have encouraged first-time buyers and low- HUD’s estimates of market share is the were reduced to 32 percent (for both home income borrowers to enter the market during projected $950 billion in single-family purchase and refinance loans), the low-mod the mid- and late-1990s. A significant originations. Shifts in economic activity share for the overall market would fall to 49.0 increase in interest rates over recent levels could obviously affect the degree to which percent. would reduce the presence of low-income this projection is borne out. As noted earlier, The heavy refinance environment was families in the mortgage market and the the Mortgage Bankers Association has simulated assuming that the single-family availability of low-income mortgages for recently revised its forecasts of mortgage origination market increased to $1,400 purchase by the GSEs. As discussed above, originations numerous times in the face of billion, which increases the owner share of the 50–55 percent range for the low-mod projected changes in market conditions. newly-mortgaged dwelling units from 72.2 market share covers economic and housing Changing economic conditions can affect the percent under HUD’s baseline model to 73.2 market conditions much less favorable than validity of HUD’s market estimates as well as percent. Refinances were assumed to account recent conditions of low interest rates and the feasibility of the GSEs’ accomplishing the for 60 percent of all single-family mortgage economic expansion. The low-mod share of housing goals. originations. If low- and moderate-income the single-family home purchase market One only has to recall the volatile nature borrowers accounted for 40 percent of could fall to 34 percent, which is over nine of the mortgage market in the past few years borrowers purchasing a home but only 36 percentage points lower than its 1998 level to appreciate the uncertainty around percent of refinancing borrowers, then the of about 43 percent, before the baseline projections of that market. Large swings in market share for the Low- and Moderate- market share for the Low- and Moderate- refinancing, consumers switching between Income Goal would be 51.6 percent. If the Income Goal would fall to 49 percent. adjustable-rate mortgages and fixed-rate first two percentages were reduced to 39 mortgages, and increased first-time percent and 32 percent, respectively, then the d. Conclusions About the Size of Low- and homebuyer activity due to record low interest market share for the Low- and Moderate- Moderate-Income Market rates, have all characterized the mortgage Income Goal would fall to 49.6 percent. Based on the above findings as well as market during the nineties. These conditions However, if the refinance market resembled numerous sensitivity analyses, HUD are beyond the control of the GSEs but they 1998 conditions, the low-mod share would concludes that 50–55 percent is a reasonable would affect their performance on the be 54 percent, as reported earlier. range of estimates of the mortgage market’s housing goals. A mortgage market dominated Finally, HUD simulated the specific low- and moderate-income share for each of by heavy refinancing on the part of middle- scenario based on the MBA’s most recent years 2001–2003. This range covers much income homeowners would reduce the GSEs’ market estimate of $912 billion and a more adverse market conditions than have ability to reach a specific target on the Low- refinance rate of 22 percent. In this case, existed recently, allows for different and Moderate-Income Goal, for example. A assuming a low-mod home purchase assumptions about the multifamily market, jump in interest rates would reduce the percentage of 40, the overall low-mod market and excludes the effects of B&C loans. HUD availability of very-low-income mortgages for share was 53.4 percent, assuming a recognizes that shifts in economic conditions the GSEs to purchase. But on the other hand, multifamily mix of 15 percent; 52.8 percent, could increase or decrease the size of the the next few years may be favorable to assuming a multifamily mix of 13.5 percent; low- and moderate-income market during achieving the goals because of the high and 54.1 percent, assuming a multifamily that period. refinancing activity in 1998 and early 1999. mix of 16.5 percent. While interest rates have recently risen, they Feasibility Determination. As stated in the G. Size of the Conventional Conforming continue to be moderate by historical 1995 rule, HUD is well aware of the volatility Market Serving Central Cities, Rural Areas, standards. A period of low-to-moderate of mortgage markets and the possible impacts and Other Underserved Areas interest rates would sustain affordability on the GSEs’ ability to meet the housing The following discussion presents levels without causing the rush to refinance goals. FHEFSSA allows for changing market estimates of the size of the conventional seen earlier in 1993 and more recently in conditions.76 If HUD has set a goal for a given conforming market for the Central City, Rural 1998. A high percentage of potential year and market conditions change Areas, and other Underserved Areas Goal; refinancers have already done so, and are less dramatically during or prior to the year, this housing goal will also be referred to as likely to do so again. making it infeasible for the GSE to attain the the Underserved Areas Goal or the
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Geographically-Targeted Goal. The first two metropolitan areas are defined as census represents an increase from 22 percent in sections focus on underserved census tracts tracts with: 1992 and 1993. In some years, refinance in metropolitan areas. Section 1 presents (a) Tract median income at or below 90 loans are even more likely than home underserved area percentages for different percent of the MSA median income; or purchase loans to finance properties located property types while Section 2 presents (b) a minority composition equal to 30 in underserved census tracts. Between 1994 market estimates for metropolitan areas. percent or more and a tract median income and 1997, 28.5 percent of refinance loans Section 3 discusses B&C loans and rural no more than 120 percent of MSA median areas. were for properties in underserved areas, income. This rule establishes that the Central Cities, compared to 25.1 percent of home purchase Owner Mortgages. The first set of numbers Rural Areas, and other Underserved Areas loans.77 In the heavy refinance year of 1998, Goal at 31 percent of eligible units financed in Table D.18 are the percentages of single- underserved areas accounted for about 25 family-owner mortgages that financed in each of calendar years 2001–2003. percent of both refinance and home purchase properties located in underserved census loans. 1. Geographically-Targeted Goal Shares by tracts of metropolitan areas between 1992 Property Type and 1998. In 1997 and 1998, approximately BILLING CODE 4210±27±P For purposes of the Geographically- 25 percent of home purchase loans financed Targeted Goal, underserved areas in properties located in these areas; this
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BILLING CODE 4120±27±C moderate-income market discussed in percent, considering both home purchase and Since the 1995 rule was written, the single- Section F. Over the past five years, the refinance loans. This is higher than the 23 family-owner market in underserved areas underserved area share of the metropolitan percent average for the 1992–94 period, has remained strong, similar to the low- and mortgage market has leveled off at 25–28 which was the period that HUD was
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BILLING CODE 4210±27±C peaks at 33 percent when the single-family- a 13.5 percent mix to 16.5 percent mix. For The percentage of single-family-owner owner percentage is at its 1997 figure of 28 example, reducing the assumed multifamily mortgages financing properties in percent. Most of the estimated market shares mix to 13.5 percent reduces the overall underserved areas is the most important for the owner percentages that are slightly market projection for underserved areas by determinant of the overall market share for below recent experience are in the 30 percent only about 0.3 percentage points. This is this goal. Therefore, Table D.19 reports range. In the baseline case, the single-family- because the underserved area differentials market shares for different single-family- owner percentage can go as low as 23 between owner and rental properties are not owner percentages ranging from 28 percent percent, which is over 3 percentage points as large as the low- and moderate-income (1997 HMDA) to 20 percent (1993 HMDA) to lower than the 1994–98 HMDA average, and differentials reported earlier. Additional 18 percent. If the single-family-owner the estimated market share for underserved sensitivity analyses were conducted as percentage for underserved areas is at its areas remains over 29 percent. described in Section F.3c. 1994–98 HMDA average of 26 percent, the Unlike the Low- and Moderate-Income For example, adding $100 ($200) billion to market share estimate is over 31 percent. The Goal, the market estimates differ only slightly the $950 billion single-family originations overall market share for underserved areas as one moves from Case 1 to Case 3 and from would reduce the underserved area market
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The limited HMDA data available for non- The recession scenario described in Section metropolitan counties also suggest that the Goal F.3.c assumed that the underserved area underserved areas market estimate would be This section presents estimates of the percentage for single-family-owner mortgages higher if complete data for non-metropolitan conventional conforming mortgage market for was 21 percent or almost seven percentage counties were available. According to the Special Affordable Housing Goal. The points lower than its 1997 value. In this case, HMDA, underserved counties accounted for special affordable market consists of owner the overall market share for underserved 42 percent of all mortgages originated in non- and rental dwelling units which are occupied areas declines to 28.4 percent. In the metropolitan areas during 1997 and 1998. By by, or affordable to: (a) Very low-income refinance scenarios, the underserved areas contrast, underserved census tracts families; or (b) low-income families in low- market share was approximately 31 percent. accounted for approximately 25 percent of all income census tracts; or (c) low-income mortgages in metropolitan area.80 If this 17 families in multifamily projects that meet 3. Adjustments: B&C Loans and the Rural point differential reflected actual market minimum income thresholds patterned on Underserved Area Market 38 conditions, then the underserved areas the low-income housing tax credit (LIHTC). B&C Loans. The procedure for dropping market share estimated using metropolitan HUD estimates that the special affordable B&C loans from the projections is the same area data should be increased by 1.9 market is 23–26 percent of the conventional as described in Section F.3.b for the Low- percentage points to account for the effects of conforming market. and Moderate-Income Goal. The underserved underserved counties in non-metropolitan HUD has determined that the annual goal area percentage for B&C loans is 44.7 percent, areas.81 To be conservative, HUD used a 1.5 for mortgage purchases qualifying under the which is much higher than the projected percentage adjustment in Table D.15 which Special Affordable Housing Goal shall be 20 percentage for the overall market (30–33 reported market estimates for the 1995–98 percent of eligible units financed in each of percent as indicated in Table D.19). Thus, period. calendar years 2001–2003. This final rule dropping B&C loans will reduce the overall The combined effects of the above analyses further provides that of the total mortgage market estimates. Consider in Table D.19, the on the underserved area market shares purchases counted toward the Special case of a single-family-owner percentage of presented in Table D.19 can now be Affordable Housing Goal, each GSE must 26 percent, which yields an overall market considered. First, deducting B&C loans from annually purchase multifamily mortgages in estimate for underserved areas of 31.4 the analysis reduces the market estimates an amount equal to at least 1.0 percent of the percent. Dropping B&C loans from the presented in Table D.19 by almost one dollar volume of combined (single-family projection model reduces the underserved percentage point. Second, including non- and multifamily) mortgage purchases over areas market share by 1.1 percentage points metropolitan counties in data for estimating 1997 through 1999. This implies the to 30.3. the underserved areas market share could following thresholds for the two GSEs: Non-metropolitan Areas. Underserved increase the market share estimates up to 2 rural areas are non-metropolitan counties percentage points. Therefore, the (In billions) with: combination of these two effects suggests that (a) county median income at or below 95 the market estimates in Table D.19 should be Fannie Mae ...... $2.85 Freddie Mac ...... 2.11 percent of the greater of statewide non- increased by up to one percentage point, with metropolitan median income or nationwide one-half percentage point being a non-metropolitan income; or conservative upward adjustment. At a Section F described HUD’s methodology (b) a minority composition equal to 30 minimum, the various estimates presented in for estimating the size of the low-and percent or more and a county median income Table D.19 are conservative estimates of the moderate-income market. Essentially the no more that 120 percent of the greater of underserved areas market excluding B&C same methodology is employed here except statewide or national non-metropolitan loans but including non-metropolitan that the focus is on the very-low-income median income. counties.82 market (0–60 percent of Area Median HMDA’s limited coverage of mortgage data The estimates presented in Table D.19 and Income) and that portion of the low-income in non-metropolitan counties makes it this section’s analysis of dropping B&C loans market (60–80 percent of Area Median Income) that is located in low-income census impossible to estimate the size of the and including non-metropolitan areas suggest tracts. Data are not available to estimate the mortgage market in rural areas. However, all that 29–32 percent is a conservative range for number of renters with incomes between 60 indicators suggest that underserved counties the market estimate for underserved areas and 80 percent of Area Median Income who in non-metropolitan areas comprise a larger based on the projection model described live in projects that meet the tax credit share of the non-metropolitan mortgage earlier. This range incorporates market thresholds. Thus, this part of the Special market than the underserved census tracts in conditions that are more adverse than have Affordable Housing Goal is not included in metropolitan areas comprise of the existed recently and it excludes B&C loans the market estimate. metropolitan mortgage market. For instance, from the market estimates. The estimate is underserved counties within rural areas conservative because, due to lack of data, it 1. Special Affordable Shares by Property include 54 percent of non-metropolitan does not fully reflect the size of the mortgage Type homeowners; on the other hand, underserved market in non-metropolitan underserved The basic approach involves estimating for census tracts in metropolitan areas account counties. each property type the share of dwelling for only 34 percent of metropolitan 4. Conclusions units financed by mortgages in a particular homeowners. year that are occupied by very-low-income During 1997–99, 36–38 percent of the Based on the above findings as well as families or by low-income families living in GSE’s total purchases in non-metropolitan numerous sensitivity analyses, HUD low-income areas. HUD has combined areas were in underserved counties while concludes that 29–32 percent is a mortgage information from HMDA, the 25–27 percent of their purchases in conservative estimate of mortgage market American Housing Survey, and the Property metropolitan areas were in underserved originations that would qualify toward Owners and Managers Survey in order to census tracts. These figures suggest the achievement of the Geographically Targeted estimate these special affordable shares. market share for underserved counties in Goal if purchased by a GSE. HUD recognizes rural areas is higher than the market share for that shifts in economic and housing market a. Special Affordable Owner Percentages underserved census tracts in metropolitan conditions could affect the size of this The percentage of single-family-owners areas. Thus, using a metropolitan estimate to market; however, the market estimate allows that qualify for the Special Affordable Goal proxy the overall market for this goal, for the possibility that adverse economic is reported in Table D.20. That table also including rural areas, is conservative. Over conditions can make housing less affordable reports data for the two components of the the past few years, the non-metropolitan than it has been in the last few years. In Special Affordable Goal—very-low-income
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BILLING CODE 4210±27±C multifamily stock affordable to very-low- low-income families in 1997. The b. Very-Low-Income Rental Percentages income families. According to the AHS, 59 corresponding average values for the AHS’s percent of single-family units and 53 percent Table D.14 in Section F reported the six surveys between 1985 and 1997 were 58 of multifamily units were affordable to very- percentages of the single-family rental and percent and 47 percent, respectively.
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Outstanding Housing Stock versus income tracts was calculated using the anticipated. Another important reason for Mortgage Flow. As discussed in Section F, an internal Census Bureau AHS and POMS data HUD’s underestimate was not anticipating important issue concerns whether rent data files.85 The POMS data showed that 8.3 the high percentage of single-family-owner based on the existing rental stock from the percent of the 1995 single-family rental stock, mortgages that would be originated for AHS can be used to proxy rents of newly and 9.3 percent of single-family rental units special affordable borrowers. During the mortgaged rental units.84 HUD’s analysis of receiving financing between 1993 and 1995, 1995–97 period, 15.4 percent of all (both POMS data suggests that it can—estimates were affordable at the 60–80 percent level home purchase and refinance) single-family- from POMS of the rent affordability of newly- and were located in low-income census owner mortgages financed properties for mortgaged rental properties are quite tracts. The POMS data also showed that 12.4 special affordable borrowers; this compares consistent with the AHS data reported in percent of the 1995 multifamily stock, and with 9.5 percent for the 1992–94 period Table D.14 on the affordability of the rental 13.5 percent of the multifamily units which was the basis for HUD’s earlier stock. Fifty-six (56) percent of single-family receiving financing between 1993 and 1995, rental properties with new mortgages analysis. The 1995–97 mortgage markets were affordable at the 60–80 percent level originated more affordable single-family between 1993 and 1995 were affordable to 86 and located in low-income census tracts. 88 very-low-income families, as was 51 percent mortgages than anticipated. Furthermore, The baseline analysis below assumes that 8 of newly-mortgaged multifamily properties. the special affordable market remained strong percent of the single-family rental units and These percentages for newly-mortgaged during the heavy refinance year of 1998. 11.0 percent of multifamily units are properties from the POMS are similar to Almost 26 percent of all dwelling units affordable at 60–80 percent of AMI and those reported above from the AHS for the financed in 1998 qualified for the Special located in low-income areas.87 rental stock. The baseline projection from Affordable Goal. HUD’s market share model assumes that 50 2. Size of the Special Affordable Market The size of the special affordable market percent of newly-mortgaged, single-family During the 1995 rule making, HUD depends in large part on the size of the rental units, and 47 percent of multifamily estimated a market share for the Special multifamily market and on the special units, are affordable to very-low-income affordable percentages of both owners and families. Affordable Goal of 20–23 percent. This estimate turned out to be below market renters. Table D.21 gives new market c. Low-Income Renters in Low-Income Areas experience, as the special affordable market estimates for different combinations of these HMDA does not provide data on low- accounted for almost 29 percent of all factors. As before, Case 2 is slightly more income renters living in low-income census housing units financed in metropolitan areas conservative than the baseline projections tracts. As a substitute, HUD used the POMS between 1995 and 1997 (see Table D.15). As (Case 1) mentioned above. For instance, Case and AHS data. The share of single-family and explained in Section F.3.a, there are several 2 assumes that only 6 percent of rental units multifamily rental units affordable to low- explanations for HUD’s underestimate of the are affordable to low-income renters living in income renters at 60–80 percent of area 1995–97 market. The financing of rental low-income areas. median income (AMI) and located in low- properties during 1995–97 was larger than BILLING CODE 4210±27±P
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BILLING CODE 4210±27±C
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When the special affordable share of the special affordable market share by 0.8 FHA attracts a different group of borrowers single-family market for home mortgages is at percentage point. than conventional lenders—is now included its 1994–98 level of 14–15 percent, the A recession scenario and a heavy refinance in the Department’s Economic Analysis for special affordable market estimate is 26–27 scenario were described during the this final GSE rule. percent under HUD’s projections. In fact, the discussion of the Low- and Moderate-Income 2 Dixie M. Blackley and James R. Follain, market estimates remain above 23 percent Goal in Section F. The recession scenario ‘‘A Critique of the Methodology Used to even if the special affordable percentage for assumed that special affordable borrowers Determine Affordable Housing Goals for the home loans falls from its 15-percent-plus would account for only 10 (9) percent of Government Sponsored Housing level during 1996–1998 to as low as 10–11 newly-originated home loans. In this case, Enterprises,’’ unpublished report prepared percent, which is similar to the 1992 level. the market share for the Special Affordable for Office of Policy Development and Thus, a 23 percent market estimate allows for Goal declines to 24.2 (23.5) percent. In the Research, Department of Housing and Urban the possibility that adverse economic heavy refinance scenario, the special Development, October 1995; and ‘‘HUD’s conditions could keep special affordable affordable percentage for refinancing Market Share Methodology and its Housing families out of the housing market. On the borrowers was assumed to be four percentage Goals for the Government Sponsored other hand, if the special affordable points lower that the corresponding Enterprises,’’ unpublished paper, March percentage stays at its recent levels, the percentage for borrowers purchasing a home. 1996. market estimate is in the 26–27 percent In this case, the market share for the Special 3 Readers not interested in this overview range.89 Affordable Goal was typically in the 24–25 may want to proceed to Section B, which B&C Loans. The procedure for dropping percent range, depending on assumptions summarizes HUD’s response to the GSEs’ B&C loans from the projections is the same about the incomes of borrowers in the home comments on HUD’s market methodology. as described in Section F.3.b for the Low- purchase market. As noted earlier, the special 4 Sections 1332(b)(4), 1333(a)(2), and and Moderate-Income Goal. The special affordable market share was approximately 1334(b)(4). affordable percentage for B&C loans is 28.5 26 percent during 1998, a period of heavy 5 So-called ‘‘jumbo’’ mortgages, greater percent, which is not much higher than the refinance activity. than $227,150 in 1998 for 1-unit properties, projected percentages for the overall market Finally, HUD simulated the specific are excluded in defining the conforming given in Table D.21. Thus, dropping B&C scenario based on the MBA’s most recent market. There is some overlap of loans loans will not appreciably reduce the overall market estimate of $912 billion and a eligible for purchase by the GSEs with loans market estimates. Consider in Table D.21, the refinance rate of 22 percent. In this case, insured by the FHA and guaranteed by the case of a single-family-owner percentage of assuming a special affordable home purchase Veterans Administration. 14 percent, which yields an overall market percentage of 14, the overall special 6 The owner of the SF 2–4 property is estimate for Special Affordable Goal of 25.9 affordable market share was varied from 25.5 counted in (a). percent. Dropping B&C loans from the percent to 26.6 percent as the multifamily 7 Property types (b), (c), and (d) consist of projection model reduces the special mix of varied from 13.5 percent to 16.5 rental units. Property types (b) and (c) must affordable market share by 0.2 percentage percent. sometimes be combined due to data points to 25.7. Thus, the market shares Tax Credit Definition. Data are not limitations; in this case, they are referred to reported in Table D.21 are reasonable available to measure the increase in market as ‘‘single-family rental units’’ (SF–R units). estimates of the size of the special affordable share associated with including low-income 8 The property shares and low-mod market excluding B&C loans. units located in multifamily buildings that percentages reported here are based on one Based on the data presented in Table D.21 meet threshold standards for the low-income set of model assumptions; other sets of and the analysis of the effects of excluding housing tax credit. Currently, the effect on assumptions are discussed in Section E. B&C loans from the market, a range of 23– GSE performance under the Special 9 This goal will be referred to as the 26 percent is a reasonable estimate of the Affordable Housing Goal is rather small. For ‘‘Underserved Areas Goal’’. special affordable market. This range instance, adding the tax credit condition 10 See Randall M. Scheessele, HMDA includes market conditions that are much increase Fannie Mae’s performance as Coverage of the Mortgage Market, Housing more adverse than have recently existed. follows: 0.5 percentage point in 1997 (from Finance Working Paper No. 7, Office of Additional sensitivity analyses are provided 16.5 to 12.0 percent); 0.29 percentage point Policy Development and Research, in the remainder of this section. in 1998 (from 14.05 to 14.34 percent); and Department of Housing and Urban Additional Sensitivity Analyses. Assuming 0.42 percent point in 1999 (from 17.20 to Development, July 1998; and 1998 HMDA that the special affordable share of the home 17.62 percent). The increase for Freddie Mac Highlights, Housing Finance Working Paper loan market is 13 percent, reducing the has been lower (about 0.20 percentage point No. HF–009, Office of Policy Development multifamily mix from 15 percent to 12 (10) in 1998 and 1999). and Research, Department of Housing and percent would reduce the overall special Urban Development, October 1999. affordable market share from 25.2 percent to 3. Conclusions 11 See William Segal, The Property Owners 24.0 (23.3) percent. In this case, increasing Sensitivity analyses were conducted for the and Managers Survey and the Multifamily the multifamily mix from 15 percent to 18 market shares of each property type, for the Housing Finance System, Housing Finance percent would increase the special affordable very-low-income shares of each property Working Paper No. 10, Office of Policy market share from 25.2 percent to 26.4 type, and for various assumptions in the Development and Research, Department of percent. market projection model. These analyses Housing and Urban Development, September As shown in Table D.21, the market suggest that 23–26 percent is a reasonable 2000. estimates under the more conservative Case estimate of the size of the conventional 12 See Freddie Mac, ‘‘Comments on 2 projections are approximately two conforming market for the Special Affordable Estimating the Size of the Conventional percentage points below those under the Case Housing Goal. This estimate excludes B&C Conforming Market for Each Housing Goal: 1 projections. This is due mainly to Case 2’s loans and allows for the possibility that Appendix III to the Comments of the Federal lower share of single-family investor homeownership will not remain as affordable Home Loan Mortgage Corporation on HUD’s mortgages (8 percent versus 10 percent in as it has over the past five years. In addition, Regulation of the Federal National Mortgage Case 1) and its lower affordability and low- the estimate covers a range of projections Association (Fannie Mae) and the Federal income-area percentages for rental housing about the size of the multifamily market. Home Loan Mortgage Corporation (Freddie (e.g., 53 percent for single-family rental units Mac)’’, May 8, 2000, page 1. in Case 2 versus 58 percent in Case 1). Endnotes to Appendix D 13 See Fannie Mae, ‘‘Fannie Mae’s Increasing the single-family projection by 1 Appendix D of the proposed rule also Comments on HUD’s Regulation of the $100 billion, from $950 billion to $1,050 included a Section I that examined the likely Federal National Mortgage Association billion, would reduce the market share for impacts of the increase in FHA loans limits (Fannie Mae) and the Federal Home Loan the Special Affordable Goal by approximately on market originations for lower-income Mortgage Corporation (Freddie Mac)’’, May 8, 0.4 percentage points, assuming the other families in the conventional market. That 2000, page 53. baseline assumptions remain unchanged.90 A analysis—which concluded that the market 14 PWC estimates of single-family mortgage $200 billion increase would reduce the impacts would likely be small given that lending volume exceed the MBA figure for
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In effect, therefore, the PWC estimates $84 million in 1998 to $383 million in 1999. market estimates. of the single-family market include the jumbo See ‘‘Freddie Mac Posts Record Year in 38 The property distribution reported in market in 1993, 1994, 1996, 1997, and 1998. Multifamily Financing, Nearly $7 Billion in Table D.1 is an example of the market share The PWC estimates are as large, or larger than Originations, ‘‘ press release, February 8, model. Thus, this section completes Step 1 the entire single-family market in 1993 and 1999; and ‘‘Freddie Mac Posts Record Year in of the three-step procedure outlined in 1998. The MBA figures are found at Multifamily Financing, Nearly $8 Billion in Section A.2.b. www.mbaa.org/marketkdata. Total Funding In 1999,’’ press release, 39 From MBA volume estimates, the 15 PWC does not offer any empirical February 14, 2000. Per-unit loan amounts on conventional share of the 1–4 family market evidence in support of their claim that 50 some Freddie Mac seniors transactions was between 86 and 88 percent of the market percent of households have below median appear to exceed $100,000. See ‘‘Freddie Mac from 1993 to 1999, with a one-period low of family income. The main reason that more Teams With Glaser Financial to Credit 81 percent in 1994. Calculated from ‘‘1–4 than half of all households have incomes Enhance $65 Million in Seniors Housing Family Mortgage Originations’’ tables (Table below the median family income is that, Loans,’’ press release, July 13, 1999; and 1—Industry and Table 2—Conventional empirically, household incomes are ‘‘Freddie Mac Closes Its Largest Seniors Loans) from ‘‘MBA Mortgage and Market significantly lower than family incomes Housing Transaction With $88 Million Deal Data,’’ at www.mbaa.org/marketdata/ as of (which serve as the basis for the local area With GMAC and Sunrise Assisted Living,’’ July 13, 2000. median income against which household press release, June 1, 1999. 40 Data provided by Fannie Mae show that incomes are compared to determine 28 Assumptions regarding the single-family conforming loans have been about 78 percent affordability status). Individuals are not mortgage market utilized in preparing the of total conventional loans over the past few included in family income calculations, but market share estimates presented in Table years. are included in household income D.10 are discussed below in section F. 41 Single-family mortgage originations of calculations, thus causing a family-based 29 Board of Governors of the Federal $950 billion were $266 billion higher than median income to be larger than a Reserve System, Flow of Funds Accounts of the $834 billion in 1997, $520 billion less household-based median income. 16 the United States, Federal Reserve Statistical than the record setting $1,470 billion in 1998 1990 is excluded from this discussion Release Z.1, June 9, 2000, p. 49. and $335 billion less than the $1,285 billion because of the unusually high multifamily 30 These market share estimates are based in 1999. As discussed later, single-family mix that year. on the annual averages of the likely range of originations could differ from $950 billion 17 These market share estimates are based multifamily origination volume expressed in during the 2001–2003 period that the goals on the annual averages of the likely range of the last column of Table 10 over 1991–1998. will be in effect. As recent experience shows, multifamily origination volume expressed in 1990 is excluded from this calculation market projections often change. For the last column of Table D.10 over 1991– 1998. 1990 is excluded from this calculation because of the unusually high multifamily example, $950 billion is similar to recent mix that year. projections (made in June, 2000) by the because of the unusually high multifamily 31 mix that year. Calculation based on Mortgage Bankers Association (MBA) of $955 18 PriceWaterhouseCoopers, Ibid., p. 15. billion in 2000 and $903 billion in 2001. (See Amy D. Crews, Robert M. Dunsky, and 32 James R. Follain, ‘‘What We Know about The data in Table D.11a ignore HMDA http://www.mbaa.org/marketdata/forecasts Multifamily Mortgage Originations,’’ report loans with ‘‘non-applicable’’ for owner type. June, 2000 Mortgage Finance Forecasts.) 33 for the U.S. Department of Housing and Due to the higher share of refinance However, MBA estimates for year 2000 Urban Development, October 1995, 20. mortgages during 1998, the overall single- volume have changed substantially over the 19 Because they are not counted toward the family owner percentage reported by HMDA past year, dropping from $1,043 in June, 1999 GSE housing goals (with the exception of a for 1998 (93.2 percent) is larger than that to $955 billion more recently (see MBA relatively small risk-sharing program), FHA reported for 1997 (91.5 percent). Mortgage Finance Forecasts table in Mortgage 34 mortgages are excluded from this analysis. Dixie M. Blackley and James R. Follain, Finance Review, Vol. 7, Issue No. 2, 1999 2nd Other categories of mortgages, considering ‘‘A Critique of the Methodology Used to quarter, p. 2). Section F will report the effects the type of insurer, servicer, or holder, do not Determine Affordable Housing Goals for the on the market estimates of alternative tend to have mortgage characteristics that Government Sponsored Housing estimates of single-family mortgage appear to differ substantially from the Enterprises,’’ report prepared for Office of originations. As also explained later, the multifamily mortgages that are purchased by Policy Development and Research, important concept for deriving the goal- Fannie Mae and Freddie Mac. There is thus Department of Housing and Urban qualifying market shares is the relative no particular basis for excluding them. Development, October 1995; and ‘‘HUD’s importance of single-family versus 20 Corresponding percentages for Freddie Market Share Methodology and its Housing multifamily mortgage originations (the Mac were 8.3 percent, 90 percent and 17 Goals for the Government Sponsored ‘‘multifamily mix’’ discussed in Section C) percent. Enterprises,’’ unpublished paper, March rather than the total dollar volume of single- 21 Corresponding percentages for Fannie 1996. family originations considered in isolation. Mae were 56 percent and 31 percent. 35 For example, they note that discussions 42 The model also requires an estimated 22 Amy D. Crews, Robert M. Dunsky, and with some lenders suggest that because of refinance rate because purchase and James R. Follain, ‘‘What We Know about higher mortgage rates on investor properties, refinance loans have different shares of goals- Multifamily Mortgage Originations,’’ report some HMDA-reported owner-occupants may qualifying units. Over the past year, the MBA for the U.S. Department of Housing and in fact be ‘‘hidden’’ investors; however, it has estimated the year 2000 refinance rate to Urban Development, October 1995. would be difficult to quantify this effect. be 16, 20, 30, and 38 percent for the total 23 Crews, Dunsky, and Follain, ibid., 20. They also note that some properties may market (expressed in dollar terms), with 16 24 Fannie Mae (2000), p. 58. switch from owner to renter properties soon percent the latest estimate. The MBA’s 25 Robert Dunsky, James R. Follain, and Jan after the mortgage is originated. While such current estimate of the year 2001 refinance Ondrich, ‘‘An Alternative Methodology to loans would be classified by HMDA as rate is very low 12 percent. The baseline Estimate the Volume of Multifamily Mortgage owner-occupied at the time of mortgage model uses a refinance rate of 35 percent for Originations,’’ report for the U.S. Department origination, they could be classified by the conforming conventional loans, which is of Housing and Urban Development, October RFS as rental mortgages. Again, it would be consistent with an MBA-type estimate of 22 1995. difficult to quantify this effect given available percent, since refinance rates are higher for 26 Average single-family loan amounts are data. the number of conventional conforming loans from HMDA. Multifamily per-unit loan 36 Blackley and Follain (1996), p. 20. than for the total market expressed in dollar amounts are from the loan-level GSE data, as 37 The unit-per-mortgage data from the terms. The 35 percent refinance assumption discussed above. 1991 RFS match closely the GSE purchase (compared with the recent, lower MBA
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(See Randall M. and rental properties, excluding these loans analyses for alternative refinance rates are Scheessele, 1998 HMDA Highlights, op. cit.) would reduce the goals-qualifying shares as presented in Sections F–H. In these appendices, the number of follows: the Low- and Moderate-Income Goal 43 The average 1998 loan amount is manufactured home loans deducted from the by 1.4 percentage points, and the Special estimated at $104,656 for owner occupied market totals for the years 1993 to 1997 are Affordable Goal and Underserved Areas units using 1998 HMDA metro average loan the same as reported by Scheessele (1999) in Goals by one percentage point. However, amounts for purchase and refinance loans, his Table D.2b. dropping manufactured housing from the and then weighting by an assumed 35 54 See Appendix D of the 1995 rule for a market totals would increase the rental share percent refinance rate. A small adjustment is detailed discussion of the AHS data and of the market, which would tend to lower made to this figure for a small number of improvements that have been made to the these impact estimates. It should also be two-to-four and investor properties (see survey to better measure borrower incomes mentioned that manufactured housing in Section D above). This produces an average and rent affordability. non-metropolitan areas is not included in loan size of $102,664 for 1998, which is then 55 Some even argued that data based on the HUD’s analysis due to lack of data; including inflated 3 percent a year for three years to recently completed stock would be a better this segment of the market would tend to arrive at an estimated $110,000 average loan proxy for mortgage flows. In the case of the increase the goals-qualifying shares of the size for 2001. Low- and Moderate-Income Goal, there is not overall market. Thus, the analyses of 44 Based on the RFS, there is an average of a large difference between the affordability manufactured housing reported above and 2.25 housing units per mortgage for 2–4 percentages for the recently constructed stock throughout the text pertain only to properties. 1.25 is used here because one and those for the outstanding stock of rental manufactured housing loans in metropolitan (i.e., the owner occupant) of the 2.25 units is properties. But this is not the case when areas, as measured by loans originated by the allocated to the SF–O category. The RFS is affordability is defined at the very-low- manufactured housing lenders identified by also the source of the 1.35 used in (4c). income level. As shown in Table D.5, the Scheessele, op. cit. 45 The share of the mortgage market recently completed stock houses 61 The accuracy of the single-family portion accounted for by owner occupants is (SF–O)/ substantially fewer very-low-income renters of HUD’s model can be tested using HMDA TOTAL; the share of the market accounted than does the existing stock. Because this data. The number of single-family loans for by all single-family rental units is SF– issue is important for the Special Affordable reported to HMDA for the years 1995 to 1997 RENTAL/TOTAL; and so on. Goal, it will be further analyzed in Section can be compared with the corresponding 46 Owners of 2–4 properties account for 1.6 H when that goal is considered. number predicted by HUD’s model. Single- percentage points of the 88 percent for SF– 56 In 1999, 88.7 percent of GSE purchases family loans reported to HMDA during 1995 O. of single-family rental units and 93.1 percent were 79 percent of the number of loans 47 Restricting the RFS analysis to 1991 of their purchases of multifamily units predicted by HUD’s model; comparable resulted in only minor changes to the market shares. qualified under the Low- and Moderate- percentages for 1996, 1997, and 1998 were 83 48 1990 conventional multifamily Income Goal, excluding the effects of missing percent , 82 percent, and 88 percent, data. respectively. Studies of the coverage of origination volume in RFS can be estimated 57 at $37.4 billion, comparable to HUD’s The goals-qualifying shares reported in HMDA data through 1996 conclude that estimate of $36–$40 billion in 1997. Table D.15 for 1995–98 are, of course, HMDA covers approximately 85 percent of Conventional, conforming single-family estimates themselves; even though the conventional conforming market. (See origination volume grew from $285 billion to information is available from HMDA and Randall M. Scheessele, HMDA Coverage of $581 billion over the same period. 1990 other data sources for most of the important the Mortgage Market, op. cit.) The fact that appears to have exhibited unusually high model parameters, there are some areas the HMDA data account for lower multifamily origination volume, as discussed where information is limited, as discussed percentages of the single-family loans earlier in Section C. throughout this appendix. predicted by HUD’s model suggests that 58 49 As noted earlier, HMDA data are The 1995–98 goals-qualifying HUD’s model may be slightly overestimating expressed in terms of number of loans rather percentages for single-family mortgages are the number of single-family loans during the than number of units. In addition, HMDA based on HMDA data for all (both home 1995–97 period. The only caveat to this data do not distinguish between owner- purchase and refinance) mortgages. Thus, the concerns manufactured housing in non- occupied one-unit properties and owner- implicit refinance rate is that reported by metropolitan areas. The average loan amount occupied 2–4 properties. This is not a HMDA for conventional conforming that HUD used in calculating the number of particular problem for this section’s analysis mortgages. units financed from mortgage origination of owner incomes. 59 HUD had based its earlier projections dollars did not include the effects of 50 Actually, the goals-qualifying heavily on market trends between 1992 and manufactured housing in non-metropolitan percentages reported in this appendix 1994. During this period, low- and moderate- areas; thus, HUD’s average loan amount is too include only the effects of manufactured income borrowers accounted for only 38 high, which suggests that single-family- houses in metropolitan areas, as HMDA does percent of home purchase loans, which is owner mortgages are underestimated. not adequately cover non-metropolitan areas. consistent with an overall market share for (Similarly, the goals-qualifying percentages 51 Since most HMDA data are for loans in the Low- and Moderate-Income Goal of 52 in HUD’s model are based on metropolitan metropolitan areas and a substantial share of percent (see Table D.17 below), which was area data and therefore do not include the manufactured homes are located outside HUD’s upper bound in the 1995 rule. Based effects of manufactured housing in non- metropolitan areas, HMDA data may not on the 1993 and 1994 mortgage markets, metropolitan areas.) accurately state the goals-qualifying shares HUD’s earlier estimates also assumed that 62 A 15 percent estimate for 1997 is for loans on manufactured homes in all areas. refinance mortgages would have smaller reported by Michelle C. Hamecs and Michael 52 Freddie Mac, the Manufactured Housing shares of lower-income borrowers than home Benedict, ‘‘Mortgage Market Developments’’, Institute and the Low Income Housing Fund purchase loans; the experience during the in Housing Economics, National Association have formed an alliance to utilize 1995–1997 period was the reverse, with of Home Builders, April 1998, pages 14–17. manufactured housing along with permanent refinance loans having higher shares of Hamecs and Benedict draw their estimate financing and secondary market involvement lower-income borrowers than home purchase from a survey by Inside B&C Lending, an to bring affordable, attractive housing to loans. For example, in 1997, 45 percent of industry publication. A 12 percent estimate underserved, low- and moderate-income refinancing borrowers had less-than-area- is reported in ‘‘Subprime Products: urban neighborhoods. Origination News. median incomes, compared with 42.5 percent Originators Still Say Subprime Is ‘Wanted (December 1998), p.18. of borrowers purchasing a home. Dead or Alive’ ’’ in Secondary Marketing 53 Randall M. Scheessele had developed a 60 The 1995–97 estimates also include the Executive, August 1998, 34–38. Forest list of nine manufactured home lenders that effects of small loans (less than $15,000) and Pafenberg reports that subprime mortgages
VerDate 112000 18:02 Oct 30, 2000 Jkt 194001 PO 00000 Frm 00185 Fmt 4701 Sfmt 4700 E:\FR\FM\31OCR2.SGM pfrm08 PsN: 31OCR2 65228 Federal Register / Vol. 65, No. 211 / Tuesday, October 31, 2000 / Rules and Regulations accounted for 10 percent of the conventional ‘‘proxy’’ the B&C market are similar to those to 13.8 percent. (See Section F.3b for conforming market in 1997; see his article, for 1995–97. As noted earlier, there is much additional sensitivity analyses of the ‘‘The Changing Face of Mortgage Lending: uncertainty about the size of the B&C market. multifamily mix.) The Subprime Market’’, Real Estate Outlook, 67 The percentages in Table D.17 refer to 75 Refinance mortgages were assumed to National Association of Realtors, March borrowers purchasing a home. In HUD’s account for 15 percent of all single-family 1999, pages 6–7. Pafenberg draws his model, the low-mod share of refinancing originations; 31 percent of refinancing estimate from Inside Mortgage Capital, which borrowers is assumed to be three percentage borrowers were assumed to have less-than- used data from the Mortgage Information points lower than the low-mod share of area-median incomes, which is 14 percentage Corporation. The uncertainty about what borrowers purchasing a home; three points below the 1997 level. A multifamily these various estimates include should be percentage points is the average differential mix of 17.3 percent was assumed during the emphasized; for example, they may include between 1992 and 1999. Thus, the market recession scenario. If the multifamily mix second mortgages and home equity loans as share model with the 40 percent owner were reduced to 15.2 percent in this well as first mortgages, which are the focus percentage in Table D.17 assumes that 40 environment, the low-mod share would drop of this analysis. percent of home purchase loans and 37 to 47.9 percent. 63 Based on information from The Mortgage percent of refinance loans are originated for 76 Section 1336(b)(3)(A). Information Corporation, Pafenberg reports borrowers with low- and moderate-income. If 77 As shown in Table D.18, excluding loans the following serious delinquency rates the same low-mod percentage were used for less than $15,000 and manufactured home (either 90 days past due or in foreclosure) for both refinancing and home purchase loans reduces the 1997 underserved area 1997 by type of subprime loan: 2.97 percent borrowers, the overall market share for the percentage by 1.2 percentage points for all for A-minus; 6.31 percent for B; 9.10 percent Low- and Moderate-Income Goal would single-family-owner loans from 27.8 to 26.6 for C; and 17.69 percent for D. The D category increase by 0.7 of a percentage point. percent. Dropping only small loans reduces accounted for only 5 percent of subprime 68 Assuming a 42 (40) percent low-mod the underserved areas share of the loans and of course, is included in the ‘‘B&C’’ share of the owner market, the low-mod metropolitan market by 0.4 and dropping category referred to in this appendix. Also share of the overall market increased from manufactured loans (above $15,0000) reduces see ‘‘Subprime Mortgage Delinquencies Inch 52.5 (51.0) percent to 55.9 (54.5) percent as the market by 0.8. Higher, Prepayments Slow During Final the multifamily mix increased from 10 78 The main reason for HUD’s Months of 1998’’, Inside MBS & ABS: Inside percent to 18 percent. underestimate in 1995 was not anticipating MBS & ABS, March 12, pages 8–11, where it 69 On the other hand, in the heavy the high percentages of single-family-owner is reported that fixed-rate A-minus loans refinance year of 1998, refinancing borrowers mortgages that would be originated in have delinquency rates similar to high-LTV had higher incomes than borrowers underserved areas. During the 1995–97 (over 95 percent) conventional conforming purchasing a home. period, about 27 percent of single-family- loans. 70 The three percentage point differential is owner mortgages financed properties in 64 Not surprisingly, the goals-qualifying the average for the years 1992 to 1998 (see underserved areas; this compares with 24 percentages for subprime lenders are much Table D.14). percent for the 1992–94 period which was higher than the percentages (43.6 percent, 71 Rather, this approach reflects 1998 the basis for HUD’s earlier analysis. There are 16.3 percent, and 27.8 percent, respectively) market conditions when the low-mod other reasons the underserved area market for the overall single-family conventional differential between home purchase and shares for 1995 to 1997 were higher than conforming market in 1997. For further refinance loans was approximately three HUD’s 25–28 percent estimate. Single-family analysis of subprime lenders, see Randall M. percentage points. rental and multifamily mortgages originated Scheessele, 1998 HMDA Highlights, op. cit. 72 The $82,022 is derived by adjusting the during this period were also more likely to 65 Dropping B&C loans in the manner 1997 figure of $68,289 upward based on finance properties located in underserved described in the text results in the goals- recent growth in the average loan amount for areas than assumed in HUD’s earlier model. qualifying percentages for the non-B&C all loans. Also, it should be mentioned that In 1997, 45 percent of single-family rental market being underestimated since HMDA one recent industry report suggests that the mortgages and 48 percent of multifamily coverage of B&C loans is less than that of B&C part of the subprime market has fallen mortgages financed properties in non-B&C loans and since B&C loans have to 37 percent. See ‘‘Retail Channel Surges in underserved areas, both figures larger than higher goals-qualifying shares than non-B&C the Troubled ‘‘98 Market’’ in Inside B&C HUD’s assumptions (37.5 percent and 42.5 loans. For instance, the low-mod shares of Lending, March 25, 1999, page 3. percent, respectively) in its earlier model. the market reported in Table D.13 73 As before, 1998 HMDA data for 200 Even in the heavy refinance year of 1998, the underestimate (to an unknown extent) the subprime lenders were used to provide an underserved areas market share (31 percent) low-mod shares of the market inclusive of estimate of 58.0 percent for the portion of the was higher than projected by HUD during the B&C loans; so reducing the low-mod owner B&C market that would qualify as low- and 1995 rule-making process. shares by dropping B&C loans in the manner moderate-income. Applying the 58.0 79 Table D.19 presents estimates for the described in the text would provide an percentage to the estimated B&C market total same combinations of projections used to underestimate of the low-mod share of the of 555,948 gives an estimate of 322,450 B&C analyze the Low- and Moderate-Income Goal. non-B&C owner market. A study of 1997 loans that would qualify for the Low- and Table D.16 in Section F.3 defines Cases 1, 2, HMDA data in Durham County, North Moderate-Income Goal. Adjusting HUD’s and 3; Case 1 (the baseline) projects a 42.5 Carolina by the Coalition for Responsible model to exclude the B&C market involves percent share for single-family rentals and a Lending (CRL) found that loans by mortgage subtracting the 555,948 B&C loans and the 48 percent share for multifamily properties and finance companies are often not reported 322,450 B&C low-mod loans from the while the more conservative Case 2 projects to HMDA. For a summary of this study, see corresponding figures estimated by HUD for 40 percent and 46 percent, respectively. ‘‘Renewed Attack on Predatory Subprime the total single-family and multifamily 80 These data do not include loans Lenders’’ in Fair Lending/CRA Compass, market inclusive of B&C loans. HUD’s originated by lenders that specialize in June 9, 1999. projection model estimates that 7,308,558 manufactured housing loans. 66 In 1998, the ‘‘unadjusted’’ market shares single-family and multifamily units will be 81 Assuming that non-metropolitan areas (i.e., inclusive of B&C loans) were as follows: financed and of these, 3,990,525 (54.6 account for 15 percent of all single-family- Low-Mod Goal (54.1 percent); Special percent as in Table D.17) will qualify for the owner mortgages and recalling that the Affordable Goal (26.0 percent); and Low- and Moderate-Income Goal. Deducting projected single-family-owner market for the Underserved Areas Goal (30.4 percent). The the B&C market estimates produces the year 2001 accounts for 72.2 percent of newly- 1998 conforming B&C market is estimated to following adjusted market estimates: a total mortgaged dwelling units, then the non- be $61 billion, with an average loan amount market of 6,752,610 of which 3,668,074 (54.3 metropolitan underserved area differential of of $75,062 representing an estimated 812,662 percent) will qualify for the Low- and 17 percent would raise the overall market B&C conforming loans. The 1998 goals- Moderate-Income Goal. estimate by 1.9 percentage point—17 qualifying percentages (low-mod, 58.0 74 This reduction in the low-mod share of percentage points times 0.15 (non- percent; special affordable, 28.5 percent; and the mortgage market share occurs because the metropolitan area mortgage market share) underserved areas, 44.7 percent) used to multifamily mix is reduced from 15 percent times 0.722 (single-family owner mortgage
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These results in Table D.19 as conservative. The year of mortgage origination were utilized to calculations overstate the actual reduction term ‘‘conservative’’ is being use here to restrict the sample to properties mortgaged because they do not include the effect of the reflect the fact that adjusting the data in during 1993–1995. increase in the rental share of the market that Table D.19 to include underserved non- 86 During the 1995 rule-making process, metropolitan counties would increase the HUD examined the rental housing stock accompanies dropping manufactured underserved areas market share more than located in low-income zones of 41 housing and small loans from the market adjusting the same data to exclude B&C loans metropolitan areas surveyed as part of the totals. would reduce it. AHS between 1989 and 1993. While the low- 89 The upper bound of 27 percent from 83 There are two LIHTC thresholds: at least income zones did not exactly coincide with HUD’s baseline special affordable model is 20 percent of the units are affordable at 50 low-income tracts, they were the only proxy obtained when the special affordable share of percent of AMI or at least 40 percent of the readily available to HUD at that time. Slightly home purchase loans is 15 percent, which units are affordable at 60 percent of AMI. over 13 percent of single-family rental units was the figure for 1997 (see Table D.20). 84 Previous analysis of this issue has were both affordable at the 60–80 percent of However, the upper bound of 27 percent is focused on the relative merits of data from AMI level and located in low-income zones; below the 1997 estimate of the special the recently completed stock versus data almost 16 percent of multifamily units fell affordable market of almost 29 percent (see from the outstanding stock. The very-low- into this category. Table D.15). There are several reasons for this 87 income percentages are much lower for the Therefore, combining the assumed very- discrepancy. As mentioned earlier, the rental recently completed stock—for instance, the low-income percentage of 50 percent (47 share in HUD’s baseline projection model is averages across the five AHS surveys were 15 percent) for single-family rental (multifamily) less than the rental share of the 1997 market. percent for recently completed multifamily units with the assumed low-income-in-low- In addition, HUD’s projection model assumes properties versus 46 percent for the income-area percentage of 8 percent (11 that the special affordable share of refinance multifamily stock. But it seems obvious that percent) for single-family rental (multifamily) data from the recently completed stock units yields the special affordable percentage mortgages will be 1.4 percentage points less would underestimate the affordability of of 58 percent (58 percent) for single-family than the corresponding share for home newly-mortgaged units because they exclude rental (multifamily) units. This is the purchase loans (1.4 percent is the average purchase and refinance transactions baseline Case 1 in Table D.6. difference between 1992 and 1998). But in involving older buildings, which generally 88 The 28.8 percent estimate for 1997 1997, the special affordable share (17.6 charge lower rents than newly constructed excludes B&C loans but includes percent) of refinance mortgages was larger buildings. Blackley and Follain concluded manufactured housing and small loans while than the corresponding share (15.3 percent) that newly constructed properties did not HUD’s earlier 20–23 percent estimate for home loans. provide a satisfactory basis for estimating the excluded the effects of these loans. Excluding 90 This reduction in the special affordable affordability of newly mortgaged properties. manufacturing housing and small loans from share of the mortgage market share occurs See ‘‘A Critique of the Methodology Used to the 1997 market would reduce the special because the multifamily mix is reduced from Determine Affordable Housing Goals for the affordable share of 28.8 percent by a 15 percent to 13.8 percent. (See above for Government Sponsored Enterprises.’’ percentage point. This can be approximated additional sensitivity analyses of the 85 Affordability was calculated as by multiplying the single-family-owner multifamily mix.) discussed earlier in Section F, using AHS property share (0.702) for 1997 by the 1.4 monthly housing cost, monthly rent, number percentage point differential between the [FR Doc. 00–27367 Filed 10–30–00; 8:45 am] of bedrooms, and MSA location fields. Low- special affordable share of all (home BILLING CODE 4210±27±P
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Part III
Department of Defense General Services Administration National Aeronautics and Space Administration Federal Acquisition Regulation; Reverse Auctioning; Notice
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DEPARTMENT OF DEFENSE Ralph DeStefano, Procurement Analyst, respondents to identify the form(s) of at (202) 501–1758. Please cite ‘‘reverse guidance that would be most beneficial GENERAL SERVICES auction notice’’. (e.g., a FAR rule, best practice guides, ADMINISTRATION SUPPLEMENTARY INFORMATION: Recently, agency instructions, training, other). several agencies have taken advantage of 3. Topics for coverage. The Councils NATIONAL AERONAUTICS AND technological advances in various are interested in hearing respondents’ SPACE ADMINISTRATION commodity procurements by conducting ideas regarding topics that should be pricing competitions on-line where addressed if guidance is developed. Federal Acquisition Regulation; competing vendors lowered their prices Examples of topics might include the Reverse Auctioning to obtain the contract. Use of this so- following— AGENCIES: Department of Defense (DOD), called ‘‘reverse auction technique’’ • The goal(s) of using an online General Services Administration (GSA), appears to be gaining interest in certain auction; and National Aeronautics and Space segments of the commercial • The ‘‘ground rules’’ of the auction; Administration (NASA). marketplace. Additional agencies are • Factors that must be considered in ACTION: Notice and request for now considering potential applications determining whether a requirement is comments. for this technique. A variety of suitable for use of reverse auction considerations will likely shape these techniques; SUMMARY: The Civilian Agency decisions and guidance may be • Ways to tailor the technique to Acquisition Council and the Defense beneficial. reflect various contracting strategies and Acquisition Regulations Council (the The Councils understand that source selection approaches (including Councils) are considering whether there interested parties have varied opinions best value cost-technical ‘‘tradeoffs’’); is a need at this time for guidance on the on the need for guidance on the • Strategies for small business use of reverse auction techniques and, if Government’s use of reverse auction participation; so, how it can be most effectively techniques. The opinions include: • • There is insufficient agency Handling of preferences; communicated (e.g., through the Federal • experience upon which to develop Barriers to conducting auctions; Acquisition Regulation, best practice • guides, agency instructions, or training). meaningful guidance at this time. Expected results from the auction; • The Councils request that interested • Explicit coverage in the FAR is not Potential advantages and parties provide comments. needed because FAR 1.102(d) permits disadvantages of reverse auction techniques for industry participants; DATES: Interested parties should submit any technique that is not expressly and comments to the FAR Secretariat at the prohibited. • Reverse auction policy should be • address shown below on or before Potential advantages and included in the FAR. January 2, 2001. disadvantages of reverse auction • Other guidance is needed, such as techniques for Federal agencies. ADDRESSES: Submit written comments best practices guides, agency 4. Content of coverage. Respondents to: General Services Administration, instructions, or training. are invited to share their ideas regarding FAR Secretariat (MVR), 1800 F Street, Therefore, the Councils are seeking possible content on the areas identified NW., Room 4035, Attn: Ms. Laurie input that will help them determine the above, or other areas they have Duarte, Washington, DC 20405. best approach to help inform thinking identified in their response to item 3. In Submit electronic comments via the regarding the use of reverse auction doing so, respondents are encouraged to Internet to: [email protected]. techniques. provide lessons learned from their Please submit comments only and cite 1. Need for guidance. The Councils ‘‘reverse auction notice’’ in all experiences with online reverse auction ask that respondents discuss whether techniques. correspondence related to this case. guidance related to the use of reverse FOR FURTHER INFORMATION CONTACT: The auction techniques is needed at this Dated: October 26, 2000. FAR Secretariat, Room 4035, GS time. Respondents are encouraged to Al Matera, Building, Washington, DC 20405, (202) discuss potential advantages and Acting Director, Federal Acquisition Policy 501–4755, for information pertaining to disadvantages. Division. status or publication schedules. For 2. Form of guidance. To the extent [FR Doc. 00–27963 Filed 10–30–00; 8:45 am] clarification of content, contact Mr. guidance is desired, the Councils ask BILLING CODE 6820±EP±M
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Part IV
Environmental Protection Agency Forty-Third Report of the TSCA Interagency Testing Committee; Notice
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ENVIRONMENTAL PROTECTION 7895; e-mail address: includes printed, paper versions of any AGENCY [email protected]. electronic comments submitted during SUPPLEMENTARY INFORMATION: an applicable comment period, is [OPPTS±41051; FRL±6049±5] available for inspection in the TSCA I. General Information Nonconfidential Information Center, Forty-Third Report of the TSCA A. Does this Action Apply to Me? North East Mall Rm. B–607, Waterside Interagency Testing Committee to the Mall, 401 M St., SW., Washington, DC. Administrator; Receipt of Report and This action is directed to the public The Center is open from noon to 4 p.m., Request for Comments in general. It may, however, be of Monday through Friday, excluding legal particular interest to you if you AGENCY: Environmental Protection holidays. The telephone number for the manufacture (defined by statute to Center is (202) 260–7099. Agency (EPA). include import) any of the chemicals ACTION: Notice. listed and you may be identified by the C. How and to Whom Do I Submit North American Industrial Comments? SUMMARY: The Toxic Substances Control Classification System (NAICS) codes You may submit comments through Act (TSCA) Interagency Testing 325 and 32411. Because this action is the mail, in person, or electronically. To Committee (ITC) transmitted its Forty- directed to the general public and other ensure proper receipt by EPA, it is Third Report to the Administrator of the entities may also be interested, the rd imperative that you identify docket EPA on November 19, 1998. In the 43 Agency has not attempted to describe all control number OPPTS–41051 in the Report, which is included with this the specific entities that may be subject line on the first page of your notice, the ITC revised the TSCA section interested in this action. If you have any response. 4(e) Priority Testing List by removing 9 questions regarding the applicability of 1. By mail. Submit your comments to: High Production Volume Chemicals this action to a particular entity, consult Document Control Office (7407), Office (HPVCs), 7 alkylphenols, and 2 the person listed under FOR FURTHER of Pollution Prevention and Toxics octylphenol ethoxylates. The ITC is also INFORMATION CONTACT. (OPPT), Environmental Protection asking EPA to promulgate a TSCA Agency, 1200 Pennsylvania Ave., NW., section (d) reporting rule for 18 B. How Can I Get Additional Information, Including Copies of this Washington, DC 20460. alkylphenols; 15 nonylphenol 2. In person or by courier. Deliver Document or Other Related Documents? ethoxylates; 3-amino-5-mercapto-1,2,4- your comments to: OPPT Document triazole; glycoluril; and methylal 1. Electronically. You may obtain Control Office (DCO) in East Tower Rm. recommended by the ITC for testing in electronic copies of this document, and G–099, Waterside Mall, 401 M St., SW., several previous ITC Reports. There are certain other related documents that Washington, DC. The DCO is open from no recommended, designated, or might be available electronically, from 8 a.m. to 4 p.m., Monday through recommended with intent-to-designate the EPA Internet Home Page at http:// Friday, excluding legal holidays. The chemicals or chemical groups in the 43rd www.epa.gov/. To access this telephone number for the DCO is (202) Report. EPA invites interested persons document, on the Home Page select 260–7093. to submit written comments on the ‘‘Laws and Regulations,’’ ‘‘Regulations 3. Electronically. You may submit Report. and Proposed Rules,’’ and then look up your comments electronically by e-mail DATES: Comments, identified by docket the entry for this document under the to: [email protected], or mail your control number OPPTS–41051, must be ‘‘Federal Register—Environmental computer disk to the address identified received on or before November 30, Documents.’’ You can also go directly to above. Do not submit any information 2000. the Federal Register listings at http:// electronically that you consider to be www.epa.gov/fedrgstr/. CBI. Electronic comments must be ADDRESSES: Comments may be You may also access additional submitted as an ASCII file avoiding the submitted by mail, electronically, or in information about the ITC and the TSCA use of special characters and any form person. Please follow the detailed testing program through the web site for of encryption. Comments and data will instructions for each method as the Office of Prevention, Pesticides and also be accepted on standard disks in provided in Unit I. of the Toxic Substances (OPPTS) at http:// WordPerfect 6.1/8 or ASCII file format. SUPPLEMENTARY INFORMATION. To ensure www.epa.gov/internet/oppts/, or go All comments in electronic form must proper receipt by EPA, it is imperative directly to the ITC Home Page at http:/ be identified by docket control number that you identify docket control number /www.epa.gov/opptintr/itc/. OPPTS–41051. Electronic comments OPPTS–41051 in the subject line on the 2. In person. The Agency has may also be filed online at many Federal first page of your response. established an official record for this Depository Libraries. FOR FURTHER INFORMATION CONTACT: For action under docket control number general information contact: Barbara OPPTS–41051. The official record D. How Should I Handle CBI Cunningham, Acting Director, consists of the documents specifically Information That I Want to Submit to Environmental Assistance Division, referenced in this action, any public the Agency? Office of Pollution Prevention and comments received during an applicable Do not submit any information Toxics (7408), Environmental Protection comment period, and other information electronically that you consider to be Agency, 1200 Pennsylvania Ave., NW., related to this action, including any CBI. You may claim information that Washington, DC 20460; telephone information claimed as Confidential you submit to EPA in response to this number: (202) 554–1404; e-mail address: Business Information (CBI). This official document as CBI by marking any part or [email protected]. record includes the documents that are all of that information as CBI. For technical information contact: physically located in the docket, as well Information so marked will not be John D. Walker, ITC Executive Director as the documents that are referenced in disclosed except in accordance with (7401), Environmental Protection those documents. The public version of procedures set forth in 40 CFR part 2. Agency, 1200 Pennsylvania Ave., NW., the official record does not include any In addition to one complete version of Washington, DC 20460; telephone information claimed as CBI. The public the comment that includes any number: (202) 260–1825; fax: (202) 260– version of the official record, which information claimed as CBI, a copy of
VerDate 112000 19:03 Oct 30, 2000 Jkt 194001 PO 00000 Frm 00002 Fmt 4701 Sfmt 4703 E:\FR\FM\31OCN3.SGM pfrm08 PsN: 31OCN3 Federal Register / Vol. 65, No. 211 / Tuesday, October 31, 2000 / Notices 65235 the comment that does not contain the recommended in the 37th Report (61 FR ii. 3-Amino-5-mercapto-1,2,4-triazole. information claimed as CBI must be 4188, February 2, 1996) (FRL–4991–6). Data needs for 3-amino-5-mercapto- submitted for inclusion in the public The ITC is also asking EPA to 1,2,4-triazole are listed in this unit as version of the official record. promulgate a TSCA section 8(d) they were expressed in the 42nd ITC Information not marked confidential reporting rule for 15 nonylphenol Report: Health effects. will be included in the public version ethoxylates that were recommended in iii. Glycoluril. Data needs for of the official record without prior the 39th Report (62 FR 8578, February glycoluril are listed in this unit as they notice. If you have any questions about 25, 1997) (FRL–5580–9), 18 were expressed in the 42nd Report: CBI or the procedures for claiming CBI, alkylphenols that were recommended in Health effects. please consult the technical person the 41st Report (63 FR 17658, April 8, iv. Methylal. Data needs for methylal listed under FOR FURTHER INFORMATION 1998) (FRL–5773–5), and 3-amino-5- are listed in this unit as they were CONTACT. mercapto-1,2,4-triazole; glycoluril; and expressed in the 42nd Report: Health methylal that were recommended in the effects, especially, in vivo mammalian E. What Should I Consider as I Prepare 42nd Report (63 FR 42553, August 7, metabolism and chronic effects. My Comments for EPA? 1998) (FRL–5797–8) to determine if 3. Status of the Priority Testing List. We invite you to provide your views there are unpublished data to meet The TSCA section 4(e) Priority Testing and comments on the ITC’s 43rd Report. previously determined U.S. Government List as of November 1998 can be found You may find the following suggestions data needs. in Table 1 of the 43rd ITC Report which helpful for preparing your comments: 1. Promulgation of a TSCA section is included in this notice. 1. Explain your views as clearly as 8(d) reporting rule. The ITC’s Voluntary possible. Information Submissions Innovative List of Subjects 2. Describe any assumptions that you Online Network (VISION) is accessible Environmental protection, Chemicals, used. through the world wide web (http:// Hazardous substances. 3. Provide copies of any technical www.epa.gov/opptintr/itc/vision.htm) Dated: October 24, 2000. information and/or data you used that and is designed to promote more Charles M. Auer, support your views. efficient use of TSCA section 8 4. Provide specific examples to Director, Chemical Control Division, Office resources through submission of of Pollution Prevention and Toxics. illustrate your concerns. electronic information. As part of 5. Make sure to submit your VISION, the Voluntary Information Forty-Third Report of the TSCA comments by the deadline in this Submission Policy clearly states that if Interagency Testing Committee to the notice. the ITC does not receive voluntary Administrator, U.S. Environmental 6. To ensure proper receipt by EPA, electronic information submissions to Protection Agency be sure to identify the docket control meet the data needs for recommended number OPPTS–41051 in the subject Table of Contents chemicals, then it will ask the EPA to Summary line on the first page of your response. promulgate a TSCA section 8(d) You may also provide the name, date, reporting rule to determine if there are I. Background and Federal Register citation. II. TSCA Section 8 Reporting unpublished studies to meet those data A. TSCA Section 8 Rules II. Background needs. The EPA is being asked to B. ITC’s Use of TSCA Section 8 and ‘‘Other promulgate a TSCA section 8(d) The Toxic Substances Control Act Information’’ reporting rule for the chemicals (TSCA) (15 U.S.C. 2601 et seq.) C. Promoting More Efficient Use of referenced in this unit, because studies Information Submission Resources authorizes the Administrator of the EPA submitted to the VISION did not D. Request to Promulgate a TSCA Section to promulgate regulations under section adequately meet the data needs for those 8(d) Rule 4(a) requiring testing of chemicals and chemicals. The ITC is requesting that E. Chemicals for Which the ITC is chemical groups in order to develop the EPA promulgate a TSCA section 8(d) Requesting That EPA Promulgate a TSCA data relevant to determining the risks Section 8(d) Rule reporting rule to meet only those data that such chemicals and chemical III. ITC’s Dialogue Group Activities During needs listed in certain previous ITC groups may present to health or the This Reporting Period (May to November Reports. 1998) environment. Section 4(e) of TSCA 2. Data needs—i. Nonylphenol established the ITC to recommend IV. Revisions to the TSCA Section 4(e) ethoxylates and alkylphenols. Data Priority Testing List chemicals and chemical groups to the needs for 15 nonylphenol ethoxylates A. Summary Table of Changes Administrator of the EPA for priority recommended in the 39th ITC Report B. Chemicals Removed From the Priority testing consideration. Section 4(e) of and 18 alkylphenols recommended in Testing List TSCA directs the ITC to revise the TSCA the 41st ITC Report are identical and are V. TSCA Interagency Testing Committee section 4(e) Priority Testing List at least listed in this unit as they were Summary every 6 months. expressed in the 41st ITC Report: EPA has received the TSCA ITC’s a. Fish and amphibian multi- This is the 43rd Report of the TSCA 43rd Report to the Administrator. The generation reproductive effects data. Interagency Testing Committee (ITC) to most recent revisions to the Priority b. Avian acute toxicity data (oral the Administrator of the U.S. Testing List are included in the ITC’s feeding and egg exposure studies). Environmental Protection Agency 43rd Report. The Report was received c. Avian reproductive effects data. (EPA). In this Report, the ITC is revising by the EPA Administrator on November d. Fish and wildlife studies data. its TSCA section 4(e) Priority Testing 19, 1998, and is included in this notice. e. Bioaccumulation or bioavailability List by removing 9 High Production The ITC revised the TSCA section 4(e) data. Volume Chemicals (HPVCs), 7 Priority Testing List by removing 9 f. Health effects data, including alkylphenols, and 2 octylphenol HPVCs that were recommended in the absorption, toxicokinetics, systemic ethoxylates. In this Report, the ITC is 36th Report (60 FR 42982, August 17, toxicity, endocrine disruption, also asking EPA to promulgate a TSCA 1995) (FRL–4965–6) and 7 alkylphenols reproductive effects, and section 8(d) Health and Safety Data and 2 octylphenol ethoxylates that were carcinogenicity data. Reporting (HaSD) rule for 18
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TABLE 1.ÐTHE TSCA SECTION 4(E) Priority Testing List (NOVEMBER 1998) 1
Report Date Chemical/Group Action
26 ...... May 1990 ...... 8 Isocyanates ...... Recommended with intent-to-designate 27 ...... November 1990 ...... 62 Aldehydes ...... Recommended with intent-to-designate 28 ...... May 1991 ...... Chemicals with Low Confidence Reference Designated Dose (RfD). Acetone Thiophenol 30 ...... May 1992 ...... 5 Siloxanes ...... Recommended 31 ...... January 1993 ...... 24 Chemicals with insufficient dermal absorp- Designated tion rate data. 32 ...... May 1993 ...... 32 Chemicals with insufficient dermal absorp- Designated tion rate data. 35 ...... November 1994 ...... 24 Chemicals with insufficient dermal absorp- Designated tion rate data. 37 ...... November 1995...... 16 Alkylphenols and 3 alkylphenol Recommended polyethoxylates. 39 ...... November 1996...... 15 Nonylphenol ethoxylates and 8 Recommended alkylphenol polyethoxylates. 41 ...... November 1997 ...... 18 Alkylphenols, 5 polyalkyphenols, and 6 Recommended alkylphenol polyethoxylates. 42 ...... May 1998 ...... 3-Amino-5-mercapto-1,2,4-triazole ...... Recommended 42 ...... May 1998 ...... Glycoluril ...... Recommended 42 ...... May 1998 ...... Methylal ...... Recommended 42 ...... May 1998 ...... Ethyl silicate2 ...... Recommended 1 The Priority Testing List is available from the ITC's web site (http://www.epa.gov/opptintr/itc). 2 Data requested through the ITC's Voluntary Information Submissions Innovative Online Network (VISION) (see http://www.epa.gov/opptintr/ itc/vision.htm).
I. Background contract support provided by EPA. ITC TSCA section 4(a) and 4(d) studies, The ITC was established by section members and staff are listed at the end TSCA section 8(c) submissions, TSCA 4(e) of the Toxic Substances Control Act of this Report. section 8(e) ‘‘substantial risk’’ notices, ‘‘For Your Information’’ (FYI) (TSCA) ‘‘to make recommendations to II. TSCA Section 8 Reporting the Administrator respecting the submissions, ITC voluntary chemical substances and mixtures to A. TSCA Section 8 Rules submissions, unpublished data which the Administrator should give Following receipt of the ITC’s Report submitted to U.S. Government priority consideration for the by the EPA Administrator and addition organizations represented on the ITC, promulgation of a rule for testing under of chemicals to the Priority Testing List, published papers, as well as use, section 4(a).... At least every six the EPA’s Office of Pollution Prevention exposure, effects, and persistence data months..., the Committee shall make and Toxics (OPPT) promulgates TSCA that are voluntarily submitted to the ITC such revisions to the Priority Testing section 8(a) Preliminary Assessment by manufacturers, importers, processors, List as it determines to be necessary and Information Reporting (PAIR) and TSCA and users of chemicals recommended by transmit them to the Administrator section 8(d) HaSD Reporting rules for the ITC. The ITC reviews this together with the Committee’s reasons chemicals added to the Priority Testing information and determines if data for the revisions’’ (Public Law 94–469, List. These rules require producers and needs should be revised, if chemicals 90 Stat. 2003 et seq. (15 U.S.C. 2601 et importers of chemicals recommended should be removed from the Priority seq.)). Since its creation in 1976, the ITC by the ITC to submit production and Testing List or if recommendations has submitted 42 semi-annual (May and exposure reports under TSCA section should be changed to designations. November) Reports to the EPA 8(a) and producers, importers, and C. Promoting More Efficient Use of Administrator transmitting the Priority processors of chemicals recommended Information Submission Resources Testing List and its revisions. In 1989, by the ITC to submit unpublished health the ITC began recommending chemical and safety studies under TSCA section The Voluntary Information substances for information reporting, 8(d). These rules are automatically Submissions Innovative Online Network screening, and testing to meet the data promulgated by OPPT unless requested (VISION) is accessible through the needs of its member U.S. Government not to do so by the ITC. world wide web (http://www.epa.gov/ organizations. ITC Reports are available opptintr/itc/vision.htm). VISION is the from http://www.epa.gov/opptintr/itc/ B. ITC’s Use of TSCA Section 8 and vehicle that is used to promote more within a few days of submission to the ‘‘Other Information’’ efficient use of resources through Administrator and from http:// The ITC reviews the TSCA section submission of electronic information. www.epa.gov/fedrgstr/ after publication 8(a) PAIR reports, TSCA section 8(d) VISION currently includes the in the Federal Register. The ITC meets HaSD studies, and ‘‘other information’’ Voluntary Information Submissions monthly and produces its revisions to that becomes available after the ITC Policy (VISP), links to the TSCA the List with administrative and adds chemicals to the Priority Testing Electronic HaSD Reporting Form technical support from the ITC staff and List. ‘‘Other information’’ includes (http://cyber22.dcoirm.epa.gov/oppt/
VerDate 112000 19:03 Oct 30, 2000 Jkt 194001 PO 00000 Frm 00004 Fmt 4701 Sfmt 4703 E:\FR\FM\31OCN3.SGM pfrm08 PsN: 31OCN3 Federal Register / Vol. 65, No. 211 / Tuesday, October 31, 2000 / Notices 65237 tsca.nsf/HaSDForm?openform) and 2.C. of this Report, the TSCA Electronic Panel before VISION was developed, instructions for the Form (http:// HaSD Reporting Form is used to provide health and safety data voluntarily www.epa.gov/opptintr/itc/tsca- electronic information on TSCA section submitted through VISION as well as hlp.htm). The VISP provides examples 8(d) studies. The ITC strongly TSCA section 8(d) health and safety of data needed by ITC member U.S. encourages those companies that must data submitted for structurally related Government organizations, examples of respond to a TSCA section 8(d) rule to chemicals in the 37th Report (61 FR studies that should not be submitted, provide only the data requested by the 4188, February 2, 1996) (FRL–4991–6). the 60-, 90-, and 120-day milestones for ITC and to provide data by using the After considering this information, and meeting the objectives of the VISP, TSCA Electronic HaSD Reporting Form. determining that it was not adequate to guidelines for using the TSCA At this time, the ITC is requesting that meet the data needs for these chemicals, Electronic HaSD Reporting Form, and the EPA promulgate a TSCA section 8(d) the ITC decided to ask EPA to instructions for electronically rule for several chemicals with the promulgate a TSCA section 8(d) HaSD submitting full studies. The TSCA understanding that submissions that rule for the nonylphenol ethoxylates Electronic HaSD Reporting Form is used were voluntarily provided as ITC recommended in the 39th Report and to provide electronic information on ITC submissions, do not have to be re- the alkylphenols recommended in the and TSCA section 8(d) studies (to meet submitted under the TSCA section 8(d) 41st Report. These chemicals are listed data needs of the ITC member U.S. HaSD rule. The ITC is requesting that in Table 2. Government organizations), FYI, and the EPA promulgate a TSCA section 8(d) 2. 42nd Report chemicals. The ITC TSCA section 8(e) studies, and studies HaSD rule to meet only those data needs sent its 42nd Report (63 FR 42554, to meet the needs of the HPV Chemical listed in previous ITC Reports. August 7, 1998) (FRL–5797–8) to Challenge Program (http:// manufacturers of 3-amino-5-mercapto- E. Chemicals for Which the ITC is www.epa.gov/opptintr/chemtest/ 1,2,4-triazole, glycoluril, and methylal Requesting That EPA Promulgate a hpv.htm). and requested that they use VISION to TSCA Section 8(d) Rule provide data to meet the U.S. D. Request to Promulgate a TSCA 1. 39th and 41st Report chemicals. Government data needs described in the Section 8(d) Rule The ITC considered structures and 42nd Report. Since no information to The ITC encourages producers, annual production and importation meet these data needs was received, the importers, processors, and users of its volumes for nonylphenol ethoxylates ITC is asking EPA to promulgate a TSCA recommended chemicals to use VISION and nonylphenol polyethoxylates section 8(d) HaSD rule for these to voluntarily provide electronic recommended in the 39th Report (62 FR chemicals to determine if there are information and establish a dialogue 8578, February 25, 1997) (FRL–5580–9) unpublished data to meet those needs. with the ITC to discuss needed data. As and for alkylphenols, polyalkylphenols, The ITC also contacted the Silicones part of VISION, the VISP clearly states and alkylphenol polyethoxylates Environmental Health and Safety that if the ITC does not receive recommended in the 41st Report (63 FR Council (SEHSC) about providing data voluntary electronic information 17658, April 9, 1998) (FRL–5773–5). In for ethyl silicate. The SEHSC agreed to submissions to meet its data needs, then addition, the ITC considered use and meet with the ITC to discuss data needs. it will ask the EPA to promulgate a health and safety data voluntarily If needed data are not provided, the ITC TSCA section 8(d) HaSD rule to submitted to the ITC by the Chemical will consider asking EPA to promulgate determine if there are unpublished data Manufacturers Association (CMA) a TSCA section 8(d) HaSD rule for ethyl to meet those needs. As noted in Unit Alkylphenols and Ethoxylates (AP&E) silicate.
TABLE 2.ÐCHEMICALS FOR WHICH THE ITC IS REQUESTING THAT EPA PROMULGATE A TSCA SECTION 8(D) HASD RULE
ITC Report describing U.S. CAS No. Chemical name Government data needs
. Pentylphenols 136±81±2 ...... Phenol, 2-pentyl- ...... 41 3279±27±4 ...... Phenol, 2-(1,1-dimethylpropyl)- ...... 41 25735±67±5 ...... Phenol, 4-sec-pentyl- ...... 41 26401±74±1 ...... Phenol, 2-sec-pentyl- ...... 41
. Hexylphenols 2446±69±7 ...... Phenol, 4-hexyl- ...... 41
. Heptylphenols 1987±50±4 ...... Phenol, 4-heptyl- ...... 41 72624±02±3 ...... Phenol, heptyl derivs...... 41 84605±25±4 ...... Phenol, 1-methylhexyl derivs...... 41
. Octylphenols 140±66±9 ...... Phenol, 4(1,1,3,3-tetramethylbutyl) ...... 41 71902±25±5 ...... Phenol, octenylated ...... 41
. Nonylphenols 68081±86±7 ...... Phenol, nonyl derivs...... 41 91672±41±2 ...... Phenol, 2-nonyl-, branched ...... 41
. Decylphenols 27157±66±0 ...... Phenol, tetradecyl- ...... 41
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TABLE 2.ÐCHEMICALS FOR WHICH THE ITC IS REQUESTING THAT EPA PROMULGATE A TSCA SECTION 8(D) HASD RULEÐContinued
ITC Report describing U.S. CAS No. Chemical name Government data needs
. Dodecylphenols 74499±35±7 ...... Phenol, (tetrapropenyl) derivs...... 41
. Tetradecylphenols 70682±80±3 ...... Phenol, tetradecyl- ...... 41
. Hexadecylphenols 2589±78±8 ...... Phenol, hexadecyl ...... 41 25401±86±9 ...... Phenol, 2-hexadecyl- ...... 41
. Other Alkylphenols 68784±24±7 ...... Phenol, C18-30-alkyl derivs...... 41
. Nonylphenol Ethoxylates 7311±27±5 ...... Ethanol, 2-[2-[2-[2-(4-nonylphenoxy)ethoxy]ethoxy]ethoxy]- ...... 39 20427±84±3 ...... Ethanol, 2-[2-(4-nonylphenoxy)ethoxy] ...... 39 20636±48±0 ...... 3,6,9,12-Tetraoxatetradecan-1-ol, 14-(4-nonylphenoxy) ...... 39 26264±02±8 ...... 3,6,9,12-Tetraoxatetradecan-1-ol, 14-(nonylphenoxy)- ...... 39 26571±11±9 ...... 3,6,9,12,15,18,21,24-Octaoxahexacosan-1-ol, 26-(nonylphenoxy)- ...... 39 27176±93±8 ...... Ethanol, 2-[2-(nonylphenoxy)ethoxy]- ...... 39 27177±01±1 ...... 3,6,9,12,15-Pentaoxaheptadecan-1-ol, 17-(nonylphenoxy)- ...... 39 27177±05±5 ...... 3,6,9,12,15,18,21-Heptaoxatricosan-1-ol, 23-(nonylphenoxy) ...... 39 27177±08±8 ...... 3,6,9,12,15,18,21,24,27-Nonaoxanonacosan-1-ol, 29-(nonylphenoxy)- ...... 39 27986±36±3 ...... Ethanol, 2-(nonylphenoxy)- ...... 39 65455±72±3 ...... 3,6,9,12,15,18,21,24,27-Nonaoxanonacosan-1-ol, 29-(isononylphenoxy)- ...... 39 98113±10±1 ...... Nonoxynol-9 ...... 39 NA1 ...... Nonoxynol-2 ...... 39 NA1 ...... Nonoxynol-3 ...... 39 NA1 ...... Nonoxynol-7 ...... 39
. Other Chemicals 109±87±5 ...... Methylal ...... 42 496±46±8 ...... Glycoluril ...... 42 16691±43±3 ...... 3-Amino-5-mercapto-1,2,4-triazole ...... 42 1Not available
III. ITC’s Dialogue Group Activities After the 42nd Report was delivered chemical manufacturers on the Council, During This Reporting Period (May to to the EPA Administrator, some (e.g., mammalian in vitro and in vivo November 1998) members of the CMA’s AP&E Panel toxicology, mammalian formed the APE Research Council pharmacokinetic, biodegradation, The CMA–ITC AP&E Dialogue Group (APERC). The APERC-ITC AP&E aquatic toxicity, and avian acute toxicity was formed by the CMA’s AP&E Panel Dialogue Group met twice during this studies). and the ITC’s AP&E Subcommittee in reporting period. On August 12 and 5. Organization for Economic March 1996 following the submission of October 15, 1998, the Dialogue Group Cooperation and Development (OECD) the ITC’s 37th Report to the EPA met to discuss: Screening Information Data Set (SIDS) Administrator in November 1995. The 1. Status of TSCA section 8(a) PAIR dossiers on nonylphenol and Group was created to facilitate the ITC’s and TSCA section 8(d) rules for the 39th nonylphenol ethoxylates. retrieval of information on uses, and 41st ITC Reports. 6. Alkylphenols that may be removed exposures, and health and ecological from the Priority Testing List. effects of alkylphenols and alkylphenol 2. Number and type of studies on 7. Alkylphenols and nonylphenol ethoxylates, and the Panel’s alkylphenols and alkylphenol ethoxylates being considered for understanding of data needed by the ethoxylates sent to VISION. Quantitative Structure Activity U.S. Government organizations 3. Status of research related to U.S. Relationship (QSAR) studies. represented on the Subcommittee. Since Government data needs for alkylphenols the creation of this Dialogue Group, and alkylphenol ethoxylates (e.g., IV. Revisions to the TSCA Section 4(e) numerous activities have occurred: See multigeneration fish studies to Priority Testing List the ITC’s 38th Report (61 FR 39832, July determine offspring reproductive A. Summary Table of Changes 30, 1996) (FRL–5379–2); 39th Report; capabilities). 40th Report (62 FR 30580, June 4, 1997) 4. Progress and results of ongoing Revisions to the TSCA section 4(e) (FRL–5718–3); 41st Report, and 42nd environmental and toxicological studies Priority Testing List are summarized in Report. being conducted or sponsored by Table 3.
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TABLE 3.ÐREVISIONS TO THE TSCA SECTION 4(E) Priority Testing List
CAS No. Chemical name Action Date
Remove November 1998 ...... HPVCs ...... 80±51±3 ...... p,p'-Oxybis(benzenesulfonylhydrazide) ...... do. do. 81±84±5 ...... Naphthalenedicarboxylic anhydride ...... do. do. 99±54±7 ...... 3,4-Dichloronitrobenzene ...... do. do. 100±29±8 ...... 4-Ethoxynitrobenzene ...... do. do. 119±33±5 ...... 4-Methyl-2-nitrophenol ...... do. do. 121±60±8 ...... 4-(Acetylamino) benzenesulfonyl chloride ...... do. do. 626±17±5 ...... 1,3-Dicyanobenzene ...... do. do. 929±06±6 ...... 2-(2-Aminoethoxy) ethanol ...... do. do. 3089±11±0 ...... Hexa(methoxymethyl) melamine ...... do. do. Butylphenols 3180±09±4 ...... 2-Butylphenol ...... do. do. 27178±34±3 ...... tert-Butylphenol mixed isomers ...... do. do...... Pentylphenols 94±06±4 ...... 4-(1-Methylbutyl)phenol ...... do. do. Octylphenols 949±13±3 ...... 2-Octylphenol ...... do. do. 27985±70±2 ...... (1-Methylheptyl)phenol ...... do. do...... Nonylphenols 11066±49±2 ...... Isononylphenol (mixed isomers) ...... do. do. 17404±66±9 ...... 4-(1-Methyloctyl)phenol ...... do. do...... Octylphenol Ethoxylates 2315±66±4 ...... Decaethylene glycol 4-isooctylphenyl ether ...... do. do. 2497±58±7 ...... Hexaethylene glycol 4-isooctylphenyl ether ...... do. do.
B. Chemicals Removed From the Priority removing 2 butylphenols, 1 Brad Campbell, Member Testing List pentylphenol, 2 octylphenols, 2 Department of Commerce 1. HPVCs—a. Rationale. The ITC is nonylphenols, and 2 octylphenol National Institute of Standards and removing 9 HPVCs (Table 3) from the ethoxylates (Table 3) from the Priority Technology Priority Testing List because: Testing List because no domestic Malcolm W. Chase, Member i. EPA, CMA, and the Environmental production or importation volumes Barbara C. Levin, Alternate National Oceanographic and Defense Fund have agreed, that by the were reported to the EPA in response to year 2003, data will be provided or 1986, 1990, and 1994 Information Atmospheric Administration Nancy Foster, Member developed for about 3,000 HPVCs Update Rules (indicating that volumes were less than 10,000 pounds per site in Teri Rowles, Alternate produced or imported into the United Richard S. Artz, Alternate States. 1985, 1989, and 1993), no domestic production or importation volumes Environmental Protection Agency ii. The 3,000 HPVCs includes the 9 Paul Campanella, Member were reported to the EPA in response to HPVCs on the Priority Testing List. David R. Williams, Alternate iii. At this time, there are no specific the February 28, 1996, PAIR rule National Cancer Institute U.S. Government data needs for these (indicating that volumes were less than Victor Fung, Member, Chair chemicals that would not be met by the 1,000 pounds per site in 1995), no TSCA Harry Seifried, Alternate HPV Chemical Challenge Program. section 8(d) studies were submitted to National Institute of Environmental b. Supporting information. HPVCs are the EPA in response to the February 28, Health Sciences chemicals with annual domestic 1996, HaSD rule and because no TSCA William Eastin, Member, Vice Chair production or importation volumes section 8(e), FYI, or ITC studies were H.B. Matthews, Alternate greater than 1 million pounds. available for these chemicals as of National Institute for Occupational Information on ITC’s review of HPVCs September 1998. Safety and Health is contained in Reports 27th (56 FR b. Supporting information. Albert E. Munson, Member 9534, March 6, 1991) (FRL–3845–3), Information on the ITC’s review of Christine Sofge, Alternate 35th (59 FR 67596, December 29, 1994) alkylphenols and alkylphenol National Science Foundation (FRL–4923–2), 36th (60 FR 42982, ethoxylates is contained in Reports 37, A. Frederick Thompson, Member August 17, 1995) (FRL–4965–6), 37th, 38, 39, 40, and 41. The ITC reviewed Joseph Reed, Alternate 38th, and 40th. use and health and safety data Occupational Safety and Health The ‘‘Screening Information Data Set voluntarily submitted to the ITC by the Administration (SIDS) Manual of the OECD Programme CMA–ITC AP&E Dialogue Group before Lyn Penniman, Member on the Co-operative Investigation of VISION was developed and health and Val H. Schaeffer, Alternate High Production Volume Chemicals,’’ safety data voluntarily submitted provides test guidance for developing Liaison Organizations and Their through VISION. data for HPVCs. The basic screening Representatives endpoints are listed in section 2.2 (page V. TSCA Interagency Testing Agency for Toxic Substances and 2) of this Manual (the ‘‘SIDS Manual;’’ Committee Disease Registry available at http://www.epa.gov/ Statutory Organizations and Their William Cibulas, Member opptintr/sids/sidsman.htm). Representatives Consumer Product Safety Commission 2. Alkylphenols and alkylphenol Jacqueline Ferrante, Member ethoxylates—a. Rationale. The ITC is Council on Environmental Quality Department of Agriculture
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;Clifford P. Rice, Member Counsel Toxics (7401), Environmental Protection Department of the Interior Scott Sherlock, OPPT, EPA Agency, Ariel Rios Bldg., 1200 Barnett A. Rattner, Member Technical Support Contractor Pennsylvania Ave., NW., Washington, Food and Drug Administration Syracuse Research Corporation DC 20460; telephone: (202) 260–1825; Edwin J. Matthews, Member ITC Staff fax: (202) 260–7895; e-mail address: Raju Kammula, Alternate John D. Walker, Executive Director [email protected]; url: http:// Norma S. L. Williams, Executive National Library of Medicine www.epa.gov/opptintr/itc. Vera W. Hudson, Member Assistant National Toxicology Program TSCA Interagency Testing Committee, [FR Doc. 00–27926 Filed 10–30–00; 8:45 am] NIEHS, FDA, and NIOSH Members Office of Pollution Prevention and BILLING CODE 6560±50±F
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Part V
Department of Health and Human Services Centers for Disease Control and Prevention
HIV Counseling, Testing, and Referral, Draft Revised Guidelines; Notice U.S. Public Health Service Recommendations for HIV Screening in Pregnant Women; Notice
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DEPARTMENT OF HEALTH AND occurred during the last 6 years in the Screening of Pregnant Women’’ should HUMAN SERVICES areas of HIV counseling, testing, and be submitted to the CDC National referral: (1) High-quality HIV prevention Prevention Information Network, P.O. Centers for Disease Control and counseling models are efficacious for Box 6003, Rockville, Maryland 20849– Prevention changing behavior and reducing the 6003; telephone (800) 458–5231; or incidence of sexually transmitted copies can be downloaded from the Draft Revised Guidelines for HIV diseases (STDs) in HIV-uninfected Division of HIV/AIDS Prevention Counseling, Testing, and Referral persons at increased risk. (2) Treatment website at www.cdc.gov/hiv. AGENCY: Centers for Disease Control and has been found to be effective, SUPPLEMENTARY INFORMATION: In 1994, Prevention (CDC), Department of Health improving quality and duration of life. the U.S. Public Health Service (USPHS) and Human Services (HHS). (3) Therapy has been shown to published guidelines for use of dramatically reduce the risk of perinatal zidovudine (ZDV) to reduce perinatal ACTION: Notice and Request for HIV transmission. (4) New testing Comments. HIV transmission. In 1995, the USPHS technologies are increasingly available. issued guidelines recommending SUMMARY: This notice announces the (5) Guidances on partner counseling and universal counseling and voluntary HIV availability for public comment of a referral services, prevention case testing of all pregnant women and document entitled ‘‘Revised Guidelines management, prevention and control of treatment for those found to be infected. for HIV Counseling, Testing, and STDs, and prevention of opportunistic Publication of these recommendations Referral.’’ infections have been published. was followed by rapid implementation Dated: October 25, 2000. DATES: Comments must be submitted in by health care providers, widespread writing on or before November 30, 2000. Joseph R. Carter, acceptance of chemoprophylaxis by Comments should be submitted to the Associate Director for Management and HIV-infected women, and a steep and Technical Information and Operations, Centers for Disease Control and sustained decline in perinatal HIV Prevention (CDC). Communications Branch, Mailstop E– transmission. Observational studies 49, Division of HIV/AIDS Prevention, [FR Doc. 00–27869 Filed 10–30–00; 8:45 am] have confirmed the effectiveness of ZDV National Center for HIV, STD, and TB BILLING CODE 4163±18±P in reducing the risk of perinatal Prevention, Centers for Disease Control transmission that has resulted in a and Prevention (CDC), 1600 Clifton greater than 75% decline in pediatric DEPARTMENT OF HEALTH AND AIDS cases diagnosed in 1998. Despite Road, N.E., Atlanta, Georgia 30333; Fax: HUMAN SERVICES 404–639–2007; E-mail: this progress, children are still [email protected]. becoming infected, with 300–400 babies Centers for Disease Control and being born with HIV each year in the Prevention FOR FURTHER INFORMATION CONTACT: United States. Studies show that many Requests for copies of the draft ‘‘Revised Draft Guidelines for Revised U.S. women, especially those who use illicit Guidelines for HIV Counseling, Testing, Public Health Service drugs, are not being tested for HIV and Referral’’ should be submitted to Recommendations for Human during pregnancy because of lack of the CDC National Prevention Immunodeficiency Virus (HIV) prenatal care. Information Network, P.O. Box 6003, Screening of Pregnant Women In 1998, the Institute of Medicine Rockville, Maryland 20849–6003; (IOM) completed a study to assess the telephone (800) 458–5231; or copies can AGENCY: Centers for Disease Control and impact of current approaches for be downloaded from the Division of Prevention (CDC), Department of Health reducing perinatal HIV transmission, HIV/AIDS Prevention website at and Human Services (HHS). identify barriers to further reductions, www.cdc.gov/hiv. ACTION: Notice and Request for and determine ways to overcome these SUPPLEMENTARY INFORMATION: The first Comments. barriers. They concluded that continued CDC guidelines, published in 1986, transmission is mainly due to a lack of SUMMARY: highlighted the importance of offering This notice announces the awareness of HIV status among some voluntary testing and counseling availability for public comment of a pregnant women and that HIV testing services and maintaining confidential document entitled ‘‘Revised U.S. Public should be simplified and routinized. records. In 1987, CDC guidelines Health Service Recommendations for IOM recommended that testing should emphasized the need to decrease any Human Immunodeficiency Virus (HIV) be offered to all pregnant women as part barriers to counseling and testing, Screening of Pregnant Women.’’ of the standard battery of prenatal tests, especially disclosure of personal DATES: Comments must be submitted in regardless of risk factors and the HIV information. An additional report was writing on or before November 30, 2000. prevalence rates in the community. published in 1993 to supplement and Comments should be submitted to the They also recommended that women update the 1987 guidelines. These Technical Information and should be informed that the HIV test is guidelines described the model of HIV Communications Branch, Mailstop E– being done and of their right to refuse prevention counseling which is 49, Division of HIV/AIDS Prevention, to be tested. currently recommended. The 1994 National Center for HIV, STD, and TB To address these and other issues, the report, ‘‘HIV Counseling, Testing and Prevention, Centers for Disease Control USPHS convened an expert consultation Referral Standards and Guidelines,’’ and Prevention (CDC), 1600 Clifton in April 1999 and sought widespread focused on standard testing procedures Road, NE., Atlanta, Georgia 30333; Fax: public comment in revising the 1995 and reiterated the importance of the HIV 404–639–2007; E-mail: guidelines for HIV counseling and prevention counseling model and the [email protected]. testing for pregnant women. The need for confidentiality of counseling FOR FURTHER INFORMATION CONTACT: resulting guidelines presented in the services. The recommendations in the Requests for copies of the draft ‘‘Revised draft ‘‘Revised U.S. Public Health current draft ‘‘Revised Guidelines for U.S. Public Health Service Service Recommendations for Human HIV Counseling, Testing, and Referral’’ Recommendations for Human Immunodeficiency Virus (HIV) reflect new advances which have Immunodeficiency Virus (HIV) Screening of Pregnant Women’’ differ
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Part VI
Environmental Protection Agency Assessment of Scientific Information Concerning StarLink Corn Cry9C Bt Corn Plant–Pesticide; Notice
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ENVIRONMENTAL PROTECTION I. General Information physically located in the docket, as well as the documents that are referenced in AGENCY A. Does this Action Apply to Me? those documents. The public version of This action is directed to the public [PF±867B; FRL±6754±3] the official record does not include any in general. This action may, however, be information claimed as CBI. The public Assessment of Scientific Information of interest to those persons who are version of the official record, which Concerning StarLink Corn Cry9C Bt technical experts in human includes printed, paper versions of any Corn Plant-Pesticide allergenicity, as well as those persons electronic comments submitted during who produce or handle corn grain or an applicable comment period, is AGENCY: Environmental Protection processed food made from corn grain. available for inspection in the Public Agency (EPA). Since other entities may also be Information and Records Integrity interested, the Agency has not Branch (PIRIB), Rm. 119, Crystal Mall ACTION: Notice. attempted to describe all the specific #2, 1921 Jefferson Davis Hwy., entities that may be affected by this Arlington, VA, from 8:30 a.m. to 4 p.m., SUMMARY: On October 25, 2000, Aventis action. If you have any questions Monday through Friday, excluding legal CropScience (Aventis) submitted new regarding the applicability of this action holidays. The PIRIB telephone number information in support of its petition to a particular entity, consult the person is (703) 305–5805. (PP 9F5050) for an exemption from the listed under FOR FURTHER INFORMATION requirement of a tolerance for the CONTACT. C. How and to Whom Do I Submit Comments? genetically engineered ‘‘plant-pesticide’’ B. How Can I Get Additional You may submit comments through materials in StarLink corn. These Information, Including Copies of this the mail, in person, or electronically. To materials are the Bacillus thuringiensis Document and Other Related ensure proper receipt by EPA, it is subsp. tolworthi Cry9C protein and the Documents? genetic material (DNA) necessary for the imperative that you identify docket production of this protein. While the 1. Electronically. You may obtain control number PF–867B in the subject original petition requested an electronic copies of this document, and line on the first page of your response. exemption covering both the Cry9C certain other related documents that 1. By mail. Submit your comments to: DNA and Cry9C protein in all food might be available electronically, from Public Information and Records commodities, this submission limits the the EPA Biopesticide Internet Home Integrity Branch (PIRIB), Information request only to foods made from Page at http://www.epa.gov/pesticides/ Resources and Services Division StarLink corn. The Aventis submission biopesticides. The EPA Biopesticide (7502C), Office of Pesticide Programs specifically addresses the potential Internet Home Page will, at a minimum, (OPP), Environmental Protection allergenicity of the Cry9C protein that contain the body of Aventis’ October 25, Agency, 1200 Pennsylvania Ave., NW., may be present in human food made 2000, submission. To access this Notice Washington, DC 20460. from StarLink corn, a line of on the Home Page, select ‘‘Laws and 2. In person or by courier. Deliver genetically modified corn developed by Regulations,’’ ‘‘Regulations and your comments to: Public Information Aventis. This notice provides Proposed Rules,’’ and then look up the and Records Integrity Branch (PIRIB), information on Aventis’ submission and entry for this document under the Information Resources and Services outlines the U.S. Environmental ‘‘Federal Register—Environmental Division (7502C), Office of Pesticide Protection Agency’s process for seeking Documents.’’ You can also go directly to Programs (OPP), Environmental public comment on and external the Federal Register listings at http:// Protection Agency, Rm. 119, Crystal scientific review of the new www.epa.gov/fedrgstr/. Mall #2, 1921 Jefferson Davis Hwy., 2. In person. The Agency has information. Arlington, VA. The PIRIB is open from established an official docket in 8:30 a.m. to 4 p.m., Monday through DATES: Comments, identified by docket connection with this Notice under Friday, excluding legal holidays. The control number PF–867B, must be docket control number PF–867B. PIRIB telephone number is (703) 305– received on or before November 27, Associated public dockets exist for: (1) 5805. 2000. the initial Notice of Filing for the food 3. Electronically. You may submit use Cry9C tolerance petition, 9F05050 your comments electronically by e-mail ADDRESSES: Comments may be (docket control number PF–867); (2) the to: [email protected], or you can submitted by mail, electronically, or in notice soliciting public comment on submit a computer disk as described person. Please follow the detailed EPA data evaluation records, questions above. Do not submit any information instructions for each method as within an EPA background document electronically that you consider to be provided in Unit I. of the regarding the use of amino acid CBI. Avoid the use of special characters SUPPLEMENTARY INFORMATION. To ensure homology, the Brown Norway Rat and any form of encryption. Electronic proper receipt by EPA, it is imperative Model, and other items regarding the submissions will be accepted in that you identify docket control number assessment for potential allergenicity, WordPerfect 6.1/8.0 or ASCII file PF–867B in the subject line on the first (docket control number PF–867A); and format. All comments in electronic form page of your response. (3) the February 29, 2000 SAP meeting, must be identified by docket control (docket control number OPP–00641). FOR FURTHER INFORMATION CONTACT: Paul number PF–867B. Electronic comments The official record for EPA’s review of Lewis, Office of Science Coordination may also be filed online at many Federal the Aventis petition will include, in and Policy (7101C), Environmental Depository Libraries. addition to the documents in the Protection Agency, 1200 Pennsylvania dockets listed above, any materials D. How Should I Handle CBI that I Want Ave., NW., Washington, DC 20460; submitted to EPA in connection with to Submit to the Agency? telephone number: (703) 305–5369; fax this Federal Register Notice, including Do not submit any information number: (703) 605–0656; e-mail address: any information claimed as Confidential electronically that you consider to be [email protected]. Business Information (CBI). This official CBI. You may claim information that SUPPLEMENTARY INFORMATION: record includes the documents that are you submit to EPA in response to this
VerDate 112000 15:17 Oct 30, 2000 Jkt 194001 PO 00000 Frm 00002 Fmt 4701 Sfmt 4703 E:\FR\FM\31OCN5.SGM pfrm08 PsN: 31OCN5 Federal Register / Vol. 65, No. 211 / Tuesday, October 31, 2000 / Notices 65247 document as CBI by marking any part or independent, external scientific peer Available information indicates that all of that information as CBI. review group during the week of some portion of the 1999 StarLink crop Information so marked will not be November 27 – December 1, 2000, to entered the human food supply, but disclosed except in accordance with consider the potential allergenicity of there is uncertainty about how much. procedures set forth in 40 CFR part 2. Cry9C. Due to concerns that StarLink corn from In addition to one complete version of The following paragraphs provide the 2000 growing season might also the comment that includes any background on the matters being directly enter the food supply, the U. S. information claimed as CBI, a copy of announced today. Department of Agriculture took steps to 1. Regulatory history. On April 7, the comment that does not contain the bring all available StarLinkTM corn 1999, EPA announced the receipt of a information claimed as CBI must be under its control. While these efforts submitted for inclusion in the public pesticide petition (PP 9F5050) (64 FR 16965) (FRL–6069–8) from AgrEvo USA continue, to date, USDA has version of the official record. successfully located and imposed Information not marked confidential Company; (Aventis has since succeeded to the interests of AgrEvo USA controls on at least 88% of the 2000 will be included in the public version StarLink crop; the government is of the official record without prior Company; also, this petition superceded a petition for an exemption that was confident that this portion of the 2000 notice. If you have any questions about StarLink corn crop is being handled so CBI or the procedures for claiming CBI, submitted in 1997 by AgrEvo at the time AgrEvo initially applied for that Cry9C DNA and protein will not please consult the person listed under registration.) The petition, 9F5050, enter the human food supply. FOR FURTHER INFORMATION CONTACT. proposed an amendment to 40 CFR Nevertheless, there remains concern E. What Should I Consider as I Prepare 180.1192 to expand the exemption from about the potential presence of the My Comments for EPA? the requirement of a tolerance for Cry9C protein in human food. You may find the following Bacillus thuringiensis subspecies 2. Aventis submission concerning suggestions helpful for preparing your tolworthi Cry9C protein and the genetic allergenicity. Aventis has expressed its comments: material necessary for its production in continuing interest in an exemption for 1. Explain your views as clearly as corn. At that time and currently, the the presence of Cry9C (DNA and possible. existing exemption covered these protein) in human food. Given the 2. Describe any assumptions that you substances in corn, only when the corn actions that assure no future planting of used. was used for animal feed, and in meat, StarLink corn, however, Aventis has 3. Provide copies of any technical poultry, milk, or eggs resulting from narrowed the scope of its original information and/or data you used that animals fed such feed. The petition petition. While the original petition support your views. sought to extend the exemption for requested an exemption covering both 4. If you estimate potential burden or these substances to all food the Cry9C DNA and Cry9C protein in all costs, explain how you arrived at the commodities. estimate that you provide. EPA completed its initial review of food commodities, this submission 5. Provide specific examples to the data submitted in support of this limits the request only to foods made illustrate your concerns. petition and solicited public comment from StarLink corn. In addition, Aventis 6. Offer alternative ways to improve on the data evaluation records and on a has asked that the exemption be granted the notice or collection activity. list of questions regarding human only for a limited time of 4 years, which 7. Make sure to submit your allergenicity assessment for non- time, Aventis contends, is necessary to comments by the deadline in this digestible proteins expressed as plant- allow all processed foods potentially notice. pesticides (64 FR 74152, December 21, made from StarLink corn grown in 1999 8. To ensure proper receipt by EPA, 1999) (FRL–6098–2). The evaluation of or 2000 to pass through the channels of be sure to identify the docket control potential human allergenicity of non- trade. number assigned to this action in the digestible proteins expressed as plant- subject line on the first page of your To support its contention that Cry9C pesticides was also the subject of a response. You may also provide the is safe for human consumption for this February 29, 2000, FIFRA Scientific name, date, and Federal Register period, Aventis has submitted new Advisory Panel (SAP) meeting (65 FR citation. information regarding the potential 5636) (FRL–6490–6). The SAP report allergenicity of the Cry9C protein that II. Background was issued on June 29, 2000 and the may be present in StarLink corn. The SAP ‘‘* * * agreed that based on the A. What Action is the Agency Taking? Aventis submission contains an available data, there is no evidence to ‘‘Introduction’’ which appears to Today, EPA is announcing the receipt indicate that Cry9C is or is not a summarize the contents of the and public availability of a submission potential food allergen.’’ remainder of the document. This from Aventis concerning its pending In September of this year, the Cry9C Introduction, which does not reflect the petition to establish an exemption from DNA was first detected in processed Agency’s position, is reprinted below. the requirement of a tolerance for the food made from corn, indicating that genetically engineered ‘‘plant-pesticide’’ Star-Link corn had been used directly in materials in StarLink corn. These it’s manufacture, contrary to the Introduction from Aventis Submission materials are the Bacillus thuringiensis restrictions on the Aventis registration A. Background subsp. tolworthi Cry9C protein and the for StarLink corn. Following StarLink corn was registered in 1998 for genetic material (DNA) necessary for the confirmation of this detection, the food use by the U.S. Environmental Protection production of this protein. The product in which the Cry9C DNA had Agency (EPA) under the Federal Insecticide, requested exemption would cover both been detected was recalled by the Fungicide, and Rodenticide Act (FIFRA) for the Cry9C DNA and Cry9C protein in all manufacturer. Additional detections use as animal feed and for industrial uses food commodities. In addition, EPA is and recalls followed. On October 12, (production of ethanol, for example). In inviting public comment on the 2000, EPA announced that Aventis, in granting that registration, EPA concluded submission as it relates to the petition. response to the Agency’s strong urging, that Cry9C protein and related DNA met the Further, EPA is announcing its intention had requested voluntary cancellation of safety standard under the FQPA for use in to hold a public meeting of an its registration for StarLink corn. field corn for animal feed use. That is, EPA
VerDate 112000 16:29 Oct 30, 2000 Jkt 194001 PO 00000 Frm 00003 Fmt 4701 Sfmt 4703 E:\FR\FM\31OCN5.SGM pfrm08 PsN: 31OCN5 65248 Federal Register / Vol. 65, No. 211 / Tuesday, October 31, 2000 / Notices concluded that ‘‘based on the toxicology data of all available information and data and Throughout this grain handling process, cited and the limited exposure expected with concludes that Cry9C is not an allergen. there is a continuous blending and animal feed use, there is reasonable certainty After addressing the data and information commingling of the corn from any one farm. that no harm will result from aggregate pertinent to assessing the question of The farm truck often carries corn taken from exposure to the U.S. population, including whether the Cry9C protein is likely to be an different fields on the farm. When the farm infants and children’’ (U.S. EPA Bt Plant- allergen, the analysis then turns to an truck arrives at the elevator at harvest, it is Pesticides Biopesticides Registration Action assessment of the potential amount of the frequently one of many trucks in line to Document, page IIB18, EPA Scientific protein to which humans might be exposed. dump. In the binning of the grain, the Advisory Panel (SAP) website, October 2000 This analysis takes into account available contents of each truck are dumped on top of science assessment document). The EPA and information about: each other in continuous fashion. the EPA’s SAP were not able to conclude that (1) The amount of StarLink corn planted As grain is dropped from the top of storage the Cry9C protein was or was not an allergen in 1999 and 2000 and the known or probable bins at the elevator, the grain forms an (FIFRA SAP Report, Session I-A Set of disposition of that corn. inverted conical shape, as the grain enters at Scientific Issues being Considered by the (2) Quantity of Cry9C protein in corn. the center and flows out to the sides of the Environmental Protection Agency Regarding: (3) The quantity of corn contained in bin. There is a ‘‘layering’’ effect of the grain Food Allergenicity of Cry9C Endotoxin and different food products. from each individual truck. other Non-digestible Proteins, page 8, June (4) The fate and disposition of Cry9C When the grain is drawn from the bottom 2000) and, thus, registration for human food protein in food. of the bin, a different flow pattern develops. use has not yet been granted. (5) Quantity of various foodstuffs which The grain flowing out will form a ‘‘core’’ in StarLink corn is a variety of corn contain corn consumed by various the center. The center portion of the grain bin modified through traditional and well- population subgroups. flows out first, then a cone develops, with the recognized techniques of genetic (6) Other relevant data. upper portions of the grain flowing out modification to contain the plant-pesticide This assessment considers the risk of toward the early part of the removal process. Bacillus thuringiensis (‘‘Bt’’) subspecies adverse allergic responses as a result of a As the bin empties, the grain at the sides of toliworthi Cry9C protein and the genetic very low level and temporary dietary the bins starts to flow out of the bottom. material necessary for the production of the exposure to Cry9C protein. The strongly All the truck deliveries used to fill the bin protein (DNA). Bt proteins have insecticidal supported conclusion is that Cry9C is not an are commingled in the storage/handling properties and have been used commercially allergen. Furthermore, the assessment process. The degree of mixing of the grain for more than 30 years. Among these strongly concludes that even if Cry9C protein will depend in part on the point at which the products are microbial sprays (Agree, were allergenic, the low level and temporary truck was dumped. Commingling further XenTari) with the Cry9B protein, which is exposures would neither sensitize occurs as elevators often draw from multiple highly homologous with the Cry9C protein. individuals nor elicit an allergic response in bins in order to ‘‘blend’’ grain for loading Corn plants with the Bt protein have been sensitized individuals. The full basis for into one transport conveyance to meet widely and safely used for a number of years. these conclusions is set forth below. quality specifications of different customers. These products thus have a long history of If an average farm truckload of 400 bushels C. Context for the Assessment safe use. of pure StarLink corn were to be delivered Pursuant to the registration, StarLink corn In order to evaluate properly the potential to an elevator and placed into even a small was planted in 1998, 1999 and 2000. human health consequences of the presence 10,000 bushel bin, a commingling/dilution of Approximately, 10,000 acres were planted in of Cry9C protein in human food, one must that grain on the order of 3 to 5 times is a 1998, 250,000 acres were planted in 1999, understand how corn is harvested and how conservative expectation, with 3 probably a and 350,000 acres were planted in 2000 out it moves through various steps in the ‘‘worst case’’ situation (Appendix 1, Corn of the approximately 80,000,000 acres of corn distribution chain before it is ultimately used Handling and Grain Handling Discussion planted in the United States in each of those in the production of food for human prepared by the North American Millers years. Although StarLink corn was not consumption. With that information, it Association and the National Grain and Feed registered for use in human food, it now becomes apparent that there is substantial Association). appears that through means not well known, dilution at each stage of the movement of Grain processing at dry mills. Grain is not all of the corn has been kept within the corn from the farm to the table. To put it delivered from elevators to dry corn mills via scope of the registered uses (animal feed and differently, the corn from one field or farm trucks or rail cars. Trucks typically haul non-food industrial uses). The significance to is commingled at each stage of the process 1,000 bushels with rail cars holding about human health of the potential presence of the with corn from other fields and farms. 3,500 bushels. The initial receiving process is Cry9C protein and/or the DNA in human This section sets forth a brief summary of much like that at the elevator, dumping into food is the subject of this analysis. The that information. A full explanation of whole a pit and elevating grain into storage bins, analysis relies on the best available data and corn handling and grain processing at dry which hold the grain until it enters the information and conservative assumptions to mills is contained in Appendix 1, Corn processing stream. assess the potential risks to human health, if Handling and Grain Handling Discussion Most dry corn mills are continuous process any. prepared by the North American Millers (rather than batch). Because the grain in a Association and the National Feed and Grain milling operation is being continuously B. Approach of the Analysis Association. mixed through tempering, milling, and Human health assessments typically Whole corn handling operations from farm handling, the degree of dilution at any one involve an evaluation of the potential hazard to elevator. Virtually all farmers harvest corn stage is probably much greater than the factor of the material in question and an evaluation with a combine equipped with a corn header of three, considered to be the ‘‘worst case’’ of the magnitude of potential exposure to the and transfer the harvested grain from the at the elevator. Assuming conservatively that material. The analysis set forth in this combine to a truck to deliver either to on- there are only seven handling and processing document follows that approach. farm storage, a feedlot, or a commercial grain operations, each of which is assumed to First, it identifies the material of potential elevator. Farm trucks today typically hold dilute the grain by a factor of three, suggests concern. In the case of StarLink corn, the 200 to 800 bushels with the average size that one truckload of pure StarLink corn only component of the corn that presents any about 400 bushels. would be diluted by several orders of potential for human health concern is the When the grain is delivered to a local magnitude, prior to reaching the food Cry9C protein and, only then, with regard to elevator, it is dumped into a pit. From the processor or consumer. the potential for it to cause an allergic pit, the grain is normally conveyed via a Wet milling. Corn is received at wet reaction in sensitized individuals. The EPA bucket elevator to the top of grain storage milling plants via truck, railcar, or barge. stated that there are no issues relative to the bins where it is dropped to the bottom of the Corn is stored at wet mills in a manner safety of food containing StarLink other than bin, or onto other grain. Bin sizes at country similar to dry mills or grain elevators. the potential allergenicity issue. elevators generally range from 10,000 bushels The corn wet milling process separates Concerning the allergenicity question, this to 1,000,000 bushels with an average of corn into four basic components: starch, assessment provides a comprehensive review 70,000 to 80,000 bushels. germ, fiber and protein. There are five basic
VerDate 112000 15:17 Oct 30, 2000 Jkt 194001 PO 00000 Frm 00004 Fmt 4701 Sfmt 4703 E:\FR\FM\31OCN5.SGM pfrm08 PsN: 31OCN5 Federal Register / Vol. 65, No. 211 / Tuesday, October 31, 2000 / Notices 65249 steps to accomplish this process. All More recently, EPA confirmed its views This document provides a brief processes in corn wet milling are continuous concerning the safety of nucleic acid in its background on food allergy and, drawing on (rather than batch). background materials from the October 18– new information and analysis, provides a risk Incoming corn is inspected and cleaned. It 20, 2000 SAP meeting; Biopesticides assessment regarding the potential is then steeped in a dilute sulfurous acid Registration Action Document: Bt Plant- allergenicity for StarLink corn expressing solution for 30 to 40 hours. This results in Pesticides (http://www.epa.gov/scipoly/sap/ Cry9C protein in food. A discussion of the the breaking of the starch and protein bonds. ). new information relevant to the allergenic The next step in the process involves coarse DNA is common to all forms of plant and grind, which separates the germ from the rest animal life and the Agency knows of no potential of the Cry9C protein is also of the kernel. Corn germ is subject to instance where these nucleic acids have been included. Based on a review of all available mechanical and solvent extraction to remove associated with toxic effects related to their information and data, this assessment oil, which is then refined through consumption as a component of food. concludes that there is a reasonable certainty degumming, alkali treatment, bleaching, In addition, the U.S. Food and Drug that Cry9C protein is not an allergen, and is winterization, and vacuum steam stripping Administration (FDA) has also concluded not likely to become an allergen even if there deoderization. The remaining slurry that DNA is generally recognized as safe were long-term consumption. consisting of fiber, starch and protein is (1992, FDA Food Policy). In an independent review by Dr. S.L. Hefle finely ground and screened to separate the Based on these EPA and FDA statements, of the Food Allergy Research and Resource fiber from the starch and protein. Fiber is the presence of Cry9C DNA in food is not Program, University of Nebraska, Dr. Hefle combined with the water from corn steeping relevant to the safety assessment of StarLink corn because it is recognized as safe. concluded that ‘‘the data shared by Aventis, to produce corn gluten feed. The remaining taken in total, while not conclusive provide starch and gluten are separated into E. Assessment of Potential Toxicity of Cry9C evidence that (sic) of low probability of hydrocyclones. The separated gluten is dried Protein to produce corn gluten meal. The remaining allergenicity of Cry9C’’ (Appendix 2). A starch is repeatedly washed in fresh water. Based on the history of the use of Bt written statement submitted by Dr. S.L. Water from this washing step flows back microbial pesticides and available toxicity Taylor of the same organization to EPA’s SAP through the process countercurrently to the data on Cry9C protein, it is reasonable to (October 20, 2000) supports this conclusion flow of corn. The starch is then converted to conclude that, other than possible (Appendix sweetners or fermentation products or dried allergenicity, there are no toxicity issues and packaged as starch (Blanchard, 1992). Of related to the food and feed use of Cry9C G. Food Allergens and the Use of the Peanut the wet milled corn, approximately 60 protein. EPA concurs with that conclusion. for Comparison Purposes percent is directed toward sweetner In the final rule establishing the exemption Food allergy affects 1–2% of adults and 6– from the requirement of a tolerance for Cry9C production, 25 percent toward alcohol 8% of children in the United States production, and 15% toward starch protein and genetic material in feed EPA stated: (Sampson, H.A. et al., 1996; Metcalfe, D.D. et production. In the latter case 80 percent is al., 1996). Protecting food allergic patients directed toward industrial purposes while Bt microbial pesticides, containing Cry proteins other than Cry9C, have been applied from unexpected exposure to food allergens the remaining 20 percent is used in food is a critical priority. Food allergy assessments starches (Personal communication, Corn for more than 30 years in food and feed crops ensure that food allergic patients are Refiners Association). consumed by the U.S. population. There have been no human safety problems As in the case of the dry milling protected from unexpected exposure to the attributed to the specific Cry proteins. An discussion, commingling of corn occurs. It is allergens that might cause them harm. In oral dose of the tryptic core Cry9C protein of estimated that one truckload of pure addition, food allergy assessment evaluates at least 3,760 mg/kg was administered to 10 StarLink corn would be diluted by several the potential of any new protein to become animals without mortality demonstrating a a new allergen, and to create a newly orders of magnitude, prior to reaching the high degree of safety for the protein. (63 FR sensitized population. food processor or consumer. This extensive 28258, May 22, 1998). processing likely leads to, at least, The lack of acute oral toxicity of Cry9C In his written submission to the SAP degradation of protein. protein is consistent with the lack of toxicity (October 20, 2000), Dr. S.L. Taylor stated that D. Safety of Cry9C DNA and DNA Generally and established safety of other Cry class sensitization to foods requires multiple proteins previously approved for use by the exposures over an extended time period and With respect to the safety of Cry9C DNA Agency. Furthermore, additional toxicity at a relatively high percentage of total protein and DNA in general, EPA has concluded that: studies submitted to EPA support this content (Appendix 3). DNA is common to all forms of plant and conclusion (MRID #44734302 and 44734303). For StarLink corn, there is no history of animal life and the Agency knows of no Thus, general toxicity issues are not significant consumption, and hence no real instance where these nucleic acids have been considered further in this assessment. associated with toxic effects related to their potential for allergic sensitization. consumption as components of food. These F. Assessment of Potential Allergenicity of Furthermore, based on available data and ubiquitous nucleic acids as they appear in Cry9C Protein information, the amount of Cry9C protein the subject plant pesticide have been Given that DNA is recognized as safe, and that could potentially be present in corn adequately characterized by the applicant that there are no general toxicity issues products would be present at levels far below and supports (sic) EPA’s conclusion that no related to Cry9C protein, the only remaining those required to cause sensitization. mammalian toxicity is anticipated from issue relative to the safety of StarLink corn Therefore, it is reasonable to conclude that dietary exposure to the genetic material is the potential allergenicity of Cry9C protein there are not now and will not be in the necessary for the production of the Cry9C and the associated level of potential risk. future any ‘‘at risk’’ consumers. Furthermore, protein. (63 FR 28259, May 22, 1998). In regard to the use of StarLink corn in the EPA has previously concluded that after There is an EPA proposed exemption from animal feed, the EPA concluded that more than 30 years of commercial use of the requirement of a tolerance for nucleic The Cry9C protein would not likely cause microbial products containing a variety of acids produced in plants as part of a plant- an allergic reaction to man when used in feed Cry proteins, including proteins from the pesticide (Plant Pesticides; Subject to the corn because; (1) it was not from allergenic Cry9 class, no allergy has been attributed to Federal Insecticide, Fungicide, and sources and (2) the best available information Cry proteins (McClintock et al., 1995; EPA, Rodenticide Act (FIFRA) and the Federal indicates that edible products derived from 1999). Food, Drug, and Cosmetic Act (FFDCA): animals such as meat, milk and eggs Most allergenic proteins are present in Proposed Rule, 59 FR 60505, November 23, intended for human consumption, have not 1994). This proposal states: been shown to be altered in their levels of 1 to 40% of the total protein of the Residues of nucleic acids produced in allergenicity due to changes in the feed stock allergenic food (Metcalfe, D.D., et al., 1996; living plants as part of a plant-pesticide utilized. (U.S. EPA Bt Plant-Pesticides Yunginger, J.W et al., 1997; Li-Chan, E. and active or inert ingredient, including both Biopesticides Registration Action Document, Nakai, S., 1989; Murphy, P.A. and deoxyribonucleic acid and ribonucleic acids, page IIB18, EPA Scientific Advisory Panel Resurrection, A.P., 1984; Kalinski, A. et al., are exempt from the requirement of a website, October 2000 science assessment 1990; Carpentier, B.A. and Lemmel, D.E., tolerance. document.) 1984; Goldberg, R.B. et al., 1983; Burks, A.W.
VerDate 112000 16:29 Oct 30, 2000 Jkt 194001 PO 00000 Frm 00005 Fmt 4701 Sfmt 4703 E:\FR\FM\31OCN5.SGM pfrm08 PsN: 31OCN5 65250 Federal Register / Vol. 65, No. 211 / Tuesday, October 31, 2000 / Notices et al., 1992; Lotan, R. et al., 1975; Crouch and ingredient since, following dry or wet protein was detected (Preliminary Study for Sussex, 1981). In contrast, there is an milling, the protein is redistributed into Detection of Cry9C Protein in Taco Shells, extremely low percentage (0.0129%) of the individual commodities. Thereafter food FIFRA 6(a)(2) report, submitted to EPA on Cry9C protein in StarLink corn grain (Table processing exposes the protein to a range of 10/16/00; MRID #44384301 and Analysis of 1) (MRID #45025701). potential degradation procedures which in Taco Shells for Cry9C Protein submitted to Even lower levels of Cry9C protein might some instances could completely destroy the EPA on 10/24/00). be expected in foods containing corn as an protein. In taco shells, for example, no
TABLE 1.ÐQUANTITIES OF CRY9C PROTEIN IN PROCESSED COMMODITIES OF STARLINK CORN (CBH351) EXPRESSED AS PERCENT OF CRUDE PROTEIN (MRID #45025701)
Crude Protein (All % Cry9C in Crude Protein Process Commodity Types) in Matrix Transgenic Transgenic (%)a Unsprayedb Sprayedc
Whole corn 8.9 ± 10 0.0116 0.0129
Dry Mill Composite Grits 7 ± 10.3 0.00861 0.0111
Hull Material 8 0.0130 0.0163
Meal 7.5 ± 9.0 0.00989 0.0118
Flour 5.2 ± 7.8 0.0149 0.0147
Solvent Extract Germ 12±25 0.0345 0.0298
Crude Oil 0 NAd NA
Refined Oil 0 NA NA
Wet Mill Steepwater Concentrate 41±62 0.000034 0.000078
Hull Material 8 0.00719 0.0146
Gluten 41±60 0.00015 0.00011
Starch 0.6 NA NA
Solvent Extracted Germ 22.6 0.00056 0.00063
Crude Oil 0 NA NA
Refined Oil 0 NA NA a Range of data from Wolff, I.A. 1982; Ensminger, M.E. et al., 1990; McGregor, C.A. 1994. bUnsprayed = Not treated with Liberty Herbicide cSprayed = Post emergent treatment with Liberty Herbicide dNA - concentration was below limit of quantitation (LOQ) for these samples.
Since allergy to Cry9C protein does not intends that its decisions involving November 27 – December 1 (or possibly already exist, the extremely low level of biotechnology and public health be earlier)at a location in the Washington, Cry9C protein estimated to be consumed based on the best available scientific DC metropolitan area. EPA also using a reasonable, worst case exposure information and expertise. Moreover, recognizes that new data may become assessment leads to the conclusion that the Cry9C protein present in StarLink corn is EPA is committed to conducting its available in the coming weeks, and the very unlikely to become an allergen. regulatory decision-making in a date of the public meeting may need to Peanuts account for the majority of fatal transparent and participatory manner. be adjusted to allow full consideration and near-fatal, food-induced, anaphylactic Therefore, EPA has decided it would be of all relevant information. As is its reactions in the United States (Yunginger JW, prudent to seek independent scientific practice, EPA will develop and provide et al., 1988; Li, X-M, et al., 2000). About 1.5 peer review of the information to the peer reviewers a ‘‘charge,’’ that is million Americans (Li, X-M, et al., 2000) are submitted by Aventis in support of the a series of questions raising scientific allergic to peanuts. Given the severity, petition for a time-limited exemption for issues on which EPA will seek the prevalence, and frequently lifelong Cry9C in human food, as well as other members’ advice. EPA will also provide persistence of peanut allergy, a comparison of the potential allergenicity of a new available and relevant information. to the members various documents as protein, such as Cry9C protein, with peanuts, The Agency has not yet determined background for the consideration of one of the most potent known human food who will participate in the peer review these issues. allergens, provides an extremely conservative group, and therefore cannot set a By November 3, 2000, EPA will make and protective assessment. specific date or location for the public available on the web and public docket This concludes the quotation of the meeting of the peer review group. (PF–867B) the Agency’s initial Introduction from the Aventis submission of Pending determination of the evaluation of the new information, as October 25, 2000. availability of experts and meeting well as announce the actual peer review 3. EPA Review Process—Public and space, EPA expects to hold a one or two meeting date/location and charge to the External Scientific Peer Review. EPA day meeting during the week of peer review group. The Aventis
VerDate 112000 15:17 Oct 30, 2000 Jkt 194001 PO 00000 Frm 00006 Fmt 4701 Sfmt 4703 E:\FR\FM\31OCN5.SGM pfrm08 PsN: 31OCN5 Federal Register / Vol. 65, No. 211 / Tuesday, October 31, 2000 / Notices 65251 submission is available on our website the members of the scientific peer reasonable certainty of no harm for the as of the publication of this notice. review group. proposed amendment of the existing In addition, consistent with its In addition, anyone having exemption from the requirement of a information concerning any allegations practice and because of the widespread tolerance under the Federal Food, Drug of adverse effects in humans from public interest in these particular and Cosmetic Act (FFDCA). EPA is also ingestion of food that may have matters, EPA is providing an acting under the authority of the Federal contained StarLink corn should submit opportunity for the public to comment Insecticide, Fungicide, and Rodenticide such information for consideration by Act (FIFRA). on the Aventis submission. EPA will the government. This information accept comments submitted on or before should be sent to: Food and Drug List of Subjects November 27, 2000. In order for Administration, Office of Field comments to be considered in the peer Programs, Division of Enforcement Environmental protection, Pesticides review process, EPA does not anticipate Programs, Outbreak Coordinaiton Staff, and Pests. granting any requests for an extension of HFS-605, 200 C St., SW., Washington, Dated: October 27, 2000. time to comment. As discussed above, DC 20204. FDA will share this Susan B. Hazen, during the comment period, EPA also information with EPA as soon as it is expects to make available additional received. Acting Deputy Director, Office of Pesticide information that it will be providing to Programs. the scientific peer review group. The B. What is the Agency’s Authority for [FR Doc 00–28076 Filed 10–27–00; 4:39 p.m.] Taking this Action? public is welcome to comment on these BILLING CODE 6560±50±S materials as well. Finally, EPA will The Agency is soliciting input to aid make any public comments available to in determining whether there is a
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Reader Aids Federal Register Vol. 65, No. 211 Tuesday, October 31, 2000
CUSTOMER SERVICE AND INFORMATION CFR PARTS AFFECTED DURING OCTOBER
Federal Register/Code of Federal Regulations At the end of each month, the Office of the Federal Register General Information, indexes and other finding 202±523±5227 publishes separately a List of CFR Sections Affected (LSA), which aids lists parts and sections affected by documents published since the revision date of each title. Laws 523±5227 3 CFR 7465) ...... 61183 Presidential Documents June 6, 1929 (Revoked Proclamations: by PLO 7465)...... 61183 523±5227 Executive orders and proclamations 7346...... 59311 11625 (See 13170)...... 60827 The United States Government Manual 523±5227 7347...... 59313 12978 (See Notice of 7348...... 59315 October 19, 2000 ...... 63193 Other Services 7349...... 59317 13078 (Amended by Electronic and on-line services (voice) 523±4534 7350...... 59321 13172) ...... 64577 Privacy Act Compilation 523±3187 7351...... 59329 13169...... 60581 Public Laws Update Service (numbers, dates, etc.) 523±6641 7352...... 60567 13170...... 60827 TTY for the deaf-and-hard-of-hearing 523±5229 7353...... 60569 13171...... 61251 7354...... 60571 13172...... 64577 ELECTRONIC RESEARCH 7355...... 60573 13173...... 64579 7356...... 60575 Administrative Orders: World Wide Web 7357...... 60577 Presidential Determinations: Full text of the daily Federal Register, CFR and other 7358...... 60579 No. 2000±30 of publications: 7359...... 60831 September 19, 7360...... 60833 http://www.access.gpo.gov/nara 2000 ...... 59339 7361...... 60835 No. 2000±31 of Federal Register information and research tools, including Public 7362...... 61255 September 28, Inspection List, indexes, and links to GPO Access: (Amended by Proc. 2000 ...... 59695 http://www.nara.gov/fedreg 7364) ...... 62575 No. 2000±32 of 7363...... 61257 E-mail September 29, 7364...... 62575 2000 ...... 59697 PENS (Public Law Electronic Notification Service) is an E-mail 7365...... 62985 No. 2000±33 of service for notification of recently enacted Public Laws. To 7366...... 62987 September 29, subscribe, send E-mail to 7367...... 62989 2000 ...... 59699 [email protected] 7368...... 63763 Notices: 7369...... 64335 with the text message: October 19, 2000...... 63193 Executive Orders: subscribe PUBLAWS-L your name July 9, 1910 (Revoked 5 CFR Use [email protected] only to subscribe or unsubscribe to by PLO 7465)...... 61183 330...... 63765, 64133 PENS. We cannot respond to specific inquiries. July 29, 1910 351...... 62991, 64133 (Revoked by PLO Reference questions. Send questions and comments about the 430...... 60837 7465) ...... 61183 Federal Register system to: 532...... 64337 November 25, 1910 591...... 58901 [email protected] (Revoked by PLO 1201...... 58902 The Federal Register staff cannot interpret specific documents or 7465) ...... 61183 1800...... 64881 regulations. January 12, 1911 8301...... 58635 (Revoked by PLO Proposed Rules: FEDERAL REGISTER PAGES AND DATE, OCTOBER 7465) ...... 61183 870...... 64530 December 21, 1911 930...... 64168 58635±58900...... 2 (Revoked by PLO 58901±59104...... 3 7465) ...... 61183 7 CFR 59105±59338...... 4 April 29, 1912 90...... 64302 59339±59694...... 5 (Revoked by PLO 91...... 64302 59695±60092...... 6 7465) ...... 61183 92...... 64302 60093±60338...... 10 June 10, 1912 93...... 64302 60339±60568...... 11 (Revoked by PLO 94...... 64302 60569±60830...... 12 7465) ...... 61183 98...... 64302 60831±61076...... 13 July 14, 1913 271...... 64581 61077±61254...... 16 (Revoked by PLO 272...... 59105 61255±62274...... 17 7465) ...... 61183 273...... 64581 62275±62576...... 18 June 6, 1914 (Revoked 274...... 59105 62577±62990...... 19 by PLO 7465)...... 61183 276...... 64581 62991±63194...... 20 October 9, 1917 301...... 61077 63195±63534...... 23 (Revoked by PLO 319...... 63765 63535±63762...... 24 7465) ...... 61183 718...... 64594 63763±64132...... 25 October 20, 1917 723...... 64589 64133±64334...... 26 (Revoked by PLO 729...... 64594 64335±64580...... 27 7465) ...... 61183 735...... 63765 64581±64880...... 30 December 22, 1919 920...... 64338 64881±65252...... 31 (Revoked by PLO 932...... 62992
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956...... 61080 308...... 64884 415...... 63922 706...... 64342 1220...... 63767 334...... 63120 417...... 63922 1230...... 62577 509...... 61260 23 CFR 1446...... 64594 510...... 61260 15 CFR 1275...... 59112 1464...... 64589 563b...... 60095 101...... 59714 1724...... 63195 571...... 63120 705...... 62599 24 CFR 4279...... 64596 575...... 60095 732...... 62600 81...... 65044 Proposed Rules 701...... 64512 734...... 60852, 62600 200...... 61072 210...... 60502 792...... 63789 738...... 60852 203...... 60320 226...... 60502 Proposed Rules: 740...... 60852, 62600 236...... 61072 235...... 60502 563b...... 60123 742 ...... 58911, 60852, 62600 291...... 60324 245...... 60502 575...... 60123 743...... 60852 880...... 61072 457...... 62311 584...... 64392 744...... 60852, 62600 881...... 61072 905...... 58672, 60121 706...... 64168 748...... 60852, 62600 883...... 61072 944...... 58672, 60121 770...... 62600 888...... 58870 13 CFR 772...... 62600 984...... 63219 982...... 58870 774 ...... 58911, 60852, 62600 1210...... 61122 121...... 60342 985...... 58870 902...... 61264, 63291 1412...... 59759 Proposed Rules: 922...... 60096 Proposed Rules: 119...... 60256 7...... 64320 8 CFR 126...... 58963 16 CFR 570...... 63756 204...... 63118 14 CFR 1...... 60857 888...... 60084 234...... 58902 25...... 60343, 63196 305...... 63201 25 CFR 245...... 63118 311...... 60857 299...... 61259 39 ...... 58640, 58641, 58645, 20...... 63144 58647, 59701, 59703, 59705, Proposed Rules: Proposed Rules: Ch. II ...... 58968 Proposed Rules: 3...... 60384 59707, 59709, 59710, 60347, 70...... 65643 60349, 60845, 60846, 60848, 307...... 60899 212...... 60384 313...... 59766 60850, 61083, 61085, 61262, 26 CFR 9 CFR 62275, 62276, 62280, 62281, 17 CFR 1 ...... 58650, 60585, 61091, 62994, 62999, 63001, 63003, 77...... 63502, 64479 4...... 58648 61268, 64888 63005, 63006, 63535, 63537, 331...... 62579 30...... 60558, 60560 602...... 61268 63540, 63542, 63790, 63792, 391...... 60093 140...... 64136, 64136 Proposed Rules: 63793, 63795, 64134, 64340, 590...... 60093 240...... 64137 1 ...... 58973, 59774, 60136, 64597, 64601, 64602 Proposed Rules: 61...... 60334 Proposed Rules: 61292, 63824 1...... 64904 1...... 62650 63...... 60334 5f...... 61292 240...... 59766 2...... 62650 65...... 60334 20...... 63025 31...... 61292 10 CFR 71 ...... 59341, 59711, 59712, 18 CFR 60352, 61087, 63544, 63797, 301...... 60822 1...... 59270 284...... 59111 63798 27 CFR 2...... 59270 73...... 59341 19 CFR 72...... 60339, 62581 91...... 60352 4...... 59719 13...... 59270 10...... 59650, 59668 275...... 63545 93...... 60352 12...... 64140 34...... 63750 Proposed Rules: 95...... 63198 163...... 59650, 59668 36...... 63750 97 ...... 59342, 59345, 63009, 9...... 61129 Proposed Rules: 39...... 63750 63010, 63013 10...... 64178 28 CFR 50...... 63769 108...... 60334 72...... 63769 121...... 60334, 60352 20 CFR 0...... 60100 434...... 60000 135...... 60334, 60352 2...... 63291 435...... 60000 Proposed Rules: 541...... 59725 187...... 59713 404...... 58970, 60584 830...... 60292 383...... 61089 416 ...... 58970, 60584, 63221 29 CFR Proposed Rules 401...... 62812 422...... 63221 34...... 63753 417...... 62812 1908...... 64282 36...... 63753 420...... 62812 21 CFR 1952...... 62610 39...... 63753 1260...... 62900 25...... 60499 2520...... 62958 72...... 60384 1274...... 62900 73...... 59717, 60253 4022...... 60859 140...... 61283, 63221 Proposed Rules: 101...... 58917 4044...... 60859 430 ...... 59550, 59590, 59761 36...... 59634, 61125 172...... 60858, 64604 Proposed Rules: 431...... 63677 39 ...... 58675, 58678, 58681, 179...... 64606 2510...... 64482 719...... 63809 58966, 59146, 59381, 59383, 314...... 64608 2570...... 64498 60124, 60126, 60129, 60591, 510...... 60097, 60585 11 CFR 30 CFR 60593, 60595, 60597, 60599, 522...... 61090 100...... 63535 60897, 61287, 61289, 62313, 526...... 61091 42...... 59048 101...... 63535 62315, 62650, 62651, 63023, 556...... 61091 47...... 59048 102...... 63535 63551, 63553, 63556, 63817, 601...... 59718, 64608 56...... 59048, 61270 104...... 63535 64176, 64629, 64631, 64632, 801...... 62282 57...... 59048, 61270 109...... 63535 64634, 64636, 64638, 64640, 862...... 62285 62...... 61270 114...... 63535 64898, 64901 876...... 64619 70...... 61270 9003...... 63535 43...... 58878 872...... 60098 71...... 61270 9033...... 63535 45...... 58878 Proposed Rules: 77...... 59048 71 ...... 59762, 59763, 59764, 801...... 62317 206...... 62612 12 CFR 60385, 61125, 61126, 61127, 1313...... 63822 Proposed Rules: 41...... 63120 62653, 62654, 62655, 62656, 920...... 59150 222...... 63120 63820, 63821, 64642 22 CFR 925...... 64906 226...... 58903 187...... 64401 Proposed Rules: 931...... 63223 263...... 60583 413...... 63922 51...... 60132 946...... 59152
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31 CFR 85...... 59896 64...... 61278, 61280 1535...... 58921 Proposed Rules: 86...... 59896 65 ...... 64372, 64374, 64378 1542...... 58921 1...... 63824 132...... 59738 67...... 64380, 64386 1545...... 58921 205...... 60796 176...... 64126 Proposed Rules: 1552...... 58921 180 ...... 59346, 61270, 62629, 65...... 60159 1807...... 58931 32 CFR 62631, 62634, 64363, 64369 67...... 64380, 64386 1811...... 58931 199...... 63202 271 ...... 59135, 61109, 63218, 206...... 58720 1815...... 58931 64161, 64164, 64402 1816...... 58931 317...... 63798 45 CFR 706 ...... 61092, 61093, 61094, 300 ...... 58656, 61112, 64623 1817...... 58931 1819...... 58931 61095, 61096, 61097, 61098, 403...... 59738 310...... 63801 1834...... 58931 61099, 62614 Proposed Rules: Proposed Rules: 1837...... 58932 724...... 62614 51...... 64648 80...... 64194 1842...... 63807 733...... 62615 52 ...... 58698, 59154, 59782, 84...... 64194 1843...... 58931 734...... 62616 60141, 60144, 61133, 61134, 86...... 64194 1845...... 58931 752...... 60861 62319, 62657, 62658, 62666, 90...... 64194 1852...... 58931 765...... 62619 62668, 62671, 62675, 62677, 91...... 64194 811...... 64619 62679, 62681, 63560, 64189, 309...... 63835 Proposed Rules: 64190, 64191, 64192, 64402, 52...... 64298 811a...... 64621 46 CFR 813...... 64621 64914 225...... 63836 928...... 63809 884...... 64348 63...... 58702, 62414 10...... 64388 944...... 63809 1615...... 60100 70...... 64192 15...... 64388 81 ...... 59154, 60362, 62319 952...... 63809 Proposed Rules: 47 CFR 82...... 59783 970...... 63809 311...... 63826 85...... 64648 1...... 59350, 60868 9904...... 59504 323...... 60900 123...... 59385 2 ...... 59350, 60108, 60869 935...... 63826 49 CFR 141...... 63027, 64479 15...... 64388 33 CFR 142...... 63027, 64479 20 ...... 58657, 60112, 62646 172...... 60382 271 ...... 59155, 61135, 64193, 25...... 59140, 59749 173...... 60382 66...... 59124 64403 27...... 60112 177...... 60382 100...... 58652 403...... 59791 32...... 58661 375...... 58663 110...... 62286 721...... 62319 54...... 58662 386...... 58663 117 ...... 59126, 60359, 60360, 1601...... 59155 63...... 60113 391...... 59362 60361, 64352, 64891 64...... 58661 571...... 63014, 64624 154...... 62288 41 CFR 69...... 64892 Proposed Rules: 165 ...... 58654, 58655, 62286, Ch. 301 ...... 62637 73 ...... 58920, 58921, 59144, 171...... 63294 62289, 62290, 62292 101±2...... 64372 59145, 59751, 59752, 60378, 172...... 63294 Proposed Rules: 101±40...... 60060 60379, 60585, 61113, 62299, 173...... 63294 117...... 59780 101±45...... 63549 63801, 63802, 64624 174...... 63294 165...... 63558 102±117...... 60060 87...... 59350, 60108 175...... 63294 36 CFR Proposed Rules: 90...... 60379, 60869 176...... 63294 60±1...... 60816 95...... 60869 177...... 63294 Proposed Rules: 60±250...... 60816 101...... 59350, 60382 178...... 63294 1190...... 58974 60±741...... 60816 Proposed Rules: 180...... 63294 1191...... 58974, 62498 61±250...... 59684 54...... 58721 1180...... 58974 1258...... 60862 73 ...... 59162, 59163, 59388, 42 CFR 50 CFR 37 CFR 59389, 59796, 59797, 60163, 36...... 58918 60387, 60602, 61299, 62683, 17 ...... 58933, 60879, 62302, 201...... 64556, 64623 409...... 62645 63043, 63044, 64923, 64924 63438, 63680 256...... 64623 410...... 62645 76...... 60387 20...... 58664 25...... 62458 38 CFR 412...... 59748 413 ...... 58919, 59748, 60104, 48 CFR 26...... 62458 21 ...... 59127, 60499, 60724, 61112 Ch. 1 ...... 60542 29...... 62458 61100 422...... 59749 Ch. 2 ...... 63801 223...... 60383 Proposed Rules: 424...... 60366 2...... 60542 600...... 59752, 63118 3...... 61132 440...... 60105 4...... 60542 622...... 61114 441...... 60105 5...... 60542 635 ...... 60118, 60889, 63807 39 CFR 489 ...... 58919, 59748, 61112, 7...... 60542 636...... 63021 20...... 60361 62645 15...... 60542 648 ...... 59758, 60118, 60586, 111...... 61102 498 ...... 58919, 61112, 62645 19...... 60542 60892, 63549, 64627, 64894 Proposed Rules: Proposed Rules: 52...... 60542 660...... 59752, 63118 111...... 58682, 64643 124...... 62976 53...... 60542 679 ...... 59380, 60587, 61264, 502...... 58682 410...... 62681 204...... 63804 62646, 63291, 63550, 64895 435...... 64919 207...... 63804 697...... 61116, 64896 40 CFR 447...... 60151 209...... 63804 Proposed Rules: 9...... 59894 1001...... 63035 219...... 63804, 63806 17 ...... 58981, 59798, 60391, 35...... 58850 1003...... 63035 236...... 63804 60603, 60605, 60607, 61218, 52 ...... 59128, 59727, 60101, 1005...... 63035 242...... 63804 62690, 62691, 63044, 63046, 61104, 62295, 62620, 62624, 1008...... 63035 252...... 63804 64414, 64649 62626, 63546, 63678, 64142, 931...... 62299 20...... 63225, 64650 64145, 64148, 64156, 64158, 43 CFR 970...... 62299 216...... 59164 643,52, 64357, 64360 Proposed Rules: 1511...... 58921 229...... 64415 60...... 61744 4...... 60602 1515...... 58921 622 ...... 59170, 60163, 63837 61...... 61744 1517...... 58921 648...... 60396, 64654 63 ...... 59894, 61744, 64161 44 CFR 1519...... 58921 660 ...... 59813, 62692, 63047 70...... 64158 59...... 60758 1523...... 58921 679...... 58727 81 ...... 59128, 60362, 62295 61...... 60758 1528...... 58921 697...... 61135
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REMINDERS payment reduction; ENVIRONMENTAL GENERAL SERVICES The items in this list were comments due by 11-6- PROTECTION AGENCY ADMINISTRATION editorially compiled as an aid 00; published 10-6-00 Air programs: Federal Acquisition Regulation to Federal Register users. AGRICULTURE Stratospheric ozone (FAR): Inclusion or exclusion from DEPARTMENT protectionÐ Forced or indentured child this list has no legal Food and Nutrition Service Essential use allowances; labor, products produced significance. Child nutrition programs: allocation; comments by; prohibition of Women, infants, and due by 11-6-00; acquisition; comments due published 10-6-00 by 11-6-00; published 9-6- RULES GOING INTO children; special supplemental nutrition Air quality implementation 00 EFFECT OCTOBER 31, programÐ plans; approval and GOVERNMENT ETHICS 2000 Public Responsibility and promulgation; various OFFICE Work Opportunity States: Standards of ethical conduct ENVIRONMENTAL Reconciliation Act of District of Columbia; for Executive Branch PROTECTION AGENCY 1996; WIC mandates comments due by 11-9- employees; comments due Air quality implementation implementation; 00; published 10-19-00 by 11-6-00; published 9-5- plans; approval and comments due by 11-6- Maryland; comments due by 00 promulgation; various 00; published 9-5-00 11-9-00; published 10-19- Correction; comments due States: COMMERCE DEPARTMENT 00 by 11-6-00; published 9- Maryland; published 9-1-00 National Oceanic and Maryland and Virginia; 12-00 Texas; published 9-1-00 Atmospheric Administration comments due by 11-9- HEALTH AND HUMAN 00; published 10-19-00 FEDERAL DEPOSIT Fishery conservation and SERVICES DEPARTMENT Montana; comments due by INSURANCE CORPORATION management: Food and Drug 11-9-00; published 10-10- Administration Practice and procedure: Northeastern United States 00 fisheriesÐ Animal drugs, feeds, and Civil monetary penalties; Virginia; comments due by related products: inflation adjustment; Atlantic mackerel, squid, 11-6-00; published 10-6- published 10-31-00 and butterfish; 00 Presubmission conferences; comments due by 11-9- TRANSPORTATION Water pollution control: comments due by 11-8- 00; published 10-10-00 00; published 8-25-00 DEPARTMENT National Pollutant Discharge West Coast States and Federal Aviation Elimination SystemÐ HEALTH AND HUMAN Administration Western Pacific SERVICES DEPARTMENT fisheriesÐ Cooling water intake Airworthiness directives: structures for new Health Care Financing Pacific Coast groundfish; facilities; comments due Administration Empresa Brasileira de comments due by 11-7- by 11-9-00; published Medicaid: Aeronautica S.A.; 00; published 9-8-00 published 9-26-00 8-31-00 Hospital, nursing facility, CORPORATION FOR Raytheon; published 9-18-00 Water pollution; effluent intermediate care facility, NATIONAL AND guidelines for point source TREASURY DEPARTMENT and mentally retarded and COMMUNITY SERVICE categories: clinic services; upper Internal Revenue Service Higher education institutions, Publicly owned treatment payment limit Income taxes: hospitals, and other non- works; pretreatment requirements modification; Partnership debt allocation; profit organizations; grants program reinvention comments due by 11-9- published 10-31-00 and agreements; uniform projects under Project XL; 00; published 10-10-00 administrative requirements; comments due by 11-6- HOUSING AND URBAN comments due by 11-6-00; 00; published 10-6-00 COMMENTS DUE NEXT published 9-5-00 DEVELOPMENT FEDERAL DEPARTMENT WEEK DEFENSE DEPARTMENT COMMUNICATIONS Low income housing: Army Department COMMISSION AGRICULTURE Housing assistance Environmental quality: Radio stations; table of DEPARTMENT payments (Section 8)Ð National Environmental assignments: Animal and Plant Health Fair market rent Policy Act; New York; comments due Inspection Service schedules for Housing implementation; comments by 11-6-00; published 9- Animal welfare: Choice Voucher due by 11-6-00; published 26-00 Program; comments Pain and distress; definitions 9-7-00 Texas; comments due by due by 11-6-00; and reporting; comments DEFENSE DEPARTMENT 11-6-00; published 10-4- published 10-6-00 due by 11-7-00; published Federal Acquisition Regulation 00 8-21-00 INTERIOR DEPARTMENT (FAR): FEDERAL EMERGENCY Plant-related quarantine, Indian Affairs Bureau Forced or indentured child MANAGEMENT AGENCY domestic: Financial activities: labor, products produced Flood insurance program: Citrus canker; comments by; prohibition of Letters of Map Revision Loan guaranty, insurance, due by 11-6-00; published acquisition; comments due Based on Fill; requests; and interest subsidy; 9-5-00 by 11-6-00; published 9-6- comments due by 11-9- revision; comments due AGRICULTURE 00 00; published 10-10-00 by 11-6-00; published 9-6- 00 DEPARTMENT Privacy Act; implementation; FEDERAL TRADE Commodity Credit comments due by 11-6-00; COMMISSION JUSTICE DEPARTMENT Corporation published 9-6-00 Trade regulation rules: Immigration and Loan and purchase programs: ENERGY DEPARTMENT Franchising and business Naturalization Service Production flexibility Nuclear safety management; opportunity ventures; Immigration: contracts; contract contractor- and government- disclosure requirements Second preference violations and diminution operated nuclear facilities; and prohibitions; employment-based in payments; fruits and comments due by 11-9-00; comments due by 11-6- immigrant physicians vegetables planting published 10-10-00 00; published 9-6-00 serving in medically
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underserved areas, etc.; Agusta S.p.A.; comments Update Service) on 202±523± of 2000 (Oct. 24, 2000; 114 national interest waivers; due by 11-6-00; published 6641. This list is also Stat. 1381) comments due by 11-6- 9-22-00 available online at http:// H.R. 4613/P.L. 106±355 00; published 9-6-00 Allison Engine Co.; www.nara.gov/fedreg. Correction; comments due comments due by 11-6- The text of laws is not National Historic Lighthouse by 11-6-00; published 00; published 9-7-00 published in the Federal Preservation Act of 2000 (Oct. 10-20-00 Bombardier; comments due Register but may be ordered 24, 2000; 114 Stat. 1385) NATIONAL AERONAUTICS by 11-6-00; published 10- in ``slip law'' (individual H.R. 5036/P.L. 106±356 AND SPACE 5-00 pamphlet) form from the ADMINISTRATION Pilatus Aircraft Ltd.; Superintendent of Documents, Dayton Aviation Heritage U.S. Government Printing Preservation Amendments Act Federal Acquisition Regulation comments due by 11-7- 00; published 10-2-00 Office, Washington, DC 20402 of 2000 (Oct. 24, 2000; 114 (FAR): Stat. 1391) Rockwell Collins, Inc.; (phone, 202±512±1808). The Forced or indentured child text will also be made comments due by 11-6- S. 1849/P.L. 106±357 labor, products produced available on the Internet from 00; published 10-2-00 by; prohibition of GPO Access at http:// White Clay Creek Wild and acquisition; comments due Rolls-Royce plc; comments www.access.gpo.gov/nara/ Scenic Rivers System Act by 11-6-00; published 9-6- due by 11-6-00; published index.html. Some laws may (Oct. 24, 2000; 114 Stat. 00 9-7-00 not yet be available. 1393) SMALL BUSINESS Class E airspace; comments H.R. 1509/P.L. 106±348 H.J. Res. 115/P.L. 106±358 ADMINISTRATION due by 11-6-00; published To authorize the Disabled 9-21-00 Making further continuing Program for Investment In Veterans' LIFE Memorial TREASURY DEPARTMENT appropriations for the fiscal Microentrepreneurs Act; Foundation to establish a year 2001, and for other implementation: Internal Revenue Service memorial in the District of purposes. (Oct. 26, 2000; 114 Disadvantaged Income taxes: Columbia or its environs to Stat. 1397) entrepreneurs; training Foreign trusts that have honor veterans who became and technical assistance U.S. beneficiaries; disabled while serving in the H.J. Res. 116/P.L. 106±359 grants; comments due by comments due by 11-6- Armed Forces of the United Making further continuing 11-9-00; published 10-10- 00; published 8-7-00 States. (Oct. 24, 2000; 114 00 Stat. 1358) appropriations for the fiscal Recognition of gain on year 2001, and for other H.R. 3201/P.L. 106±349 STATE DEPARTMENT certain transfers to certain purposes. (Oct. 26, 2000; 114 Nationality and passports: foreign trusts and estates; Carter G. Woodson Home Stat. 1398) comments due by 11-6- National Historic Site Study Executing passport 00; published 8-7-00 Act of 2000 (Oct. 24, 2000; Last List October 26, 2000 application on behalf of 114 Stat. 1359) minor; procedures; TREASURY DEPARTMENT H.R. 3632/P.L. 106±350 comments due by 11-6- Thrift Supervision Office 00; published 10-10-00 Golden Gate National Mutual savings associations, Recreation Area Boundary Public Laws Electronic Visas; immigrant and mutual holding company Adjustment Act of 2000 (Oct. Notification Service nonimmigrant documention: reorganizations, and 24, 2000; 114 Stat. 1361) (PENS) conversions from mutual to Immigrant visa fees; change H.R. 3676/P.L. 106±351 stock form; comments due in payment procedures; Santa Rosa and San Jacinto by 11-9-00; published 10- comments due by 11-7- Mountains National Monument PENS is a free electronic mail 10-00 00; published 9-8-00 Act of 2000 (Oct. 24, 2000; notification service of newly TRANSPORTATION Repurchases of stock by 114 Stat. 1362) enacted public laws. To recently-converted savings DEPARTMENT H.R. 4063/P.L. 106±352 subscribe, go to www.gsa.gov/ associations, mutual holding Rosie the Riveter/World War II archives/publaws-l.html or Coast Guard company dividend waivers, Home Front National Historical send E-mail to Ports and waterways safety: and Gramm-Leach-Biley Act Park Establishment Act of [email protected] with changes; comments due by Portage River and Lily Pond 2000 (Oct. 24, 2000; 114 Stat. the following text message: 11-9-00; published 10-10-00 Harbor, MI; inland 1370) waterways navigation SUBSCRIBE PUBLAWS-L regulation removed; H.R. 4275/P.L. 106±353 Your Name. comments due by 11-6- LIST OF PUBLIC LAWS Colorado Canyons National 00; published 9-5-00 Conservation Area and Black Note: This service is strictly This is a continuing list of Ridge Canyons Wilderness for E-mail notification of new TRANSPORTATION public bills from the current Act of 2000 (Oct. 24, 2000; laws. The text of laws is not DEPARTMENT session of Congress which 114 Stat. 1374) available through this service. Federal Aviation have become Federal laws. It H.R. 4386/P.L. 106±354 PENS cannot respond to Administration may be used in conjunction Breast and Cervical Cancer specific inquiries sent to this Airworthiness directives: with ``P L U S'' (Public Laws Prevention and Treatment Act address.
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