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A Pilot Program
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This program is intended to promote the development and operation of multifamily transitional housing for homeless veterans. It offers a number of unique features to achieve this goal. |
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Financing
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Loans under the program will be made directly from the Federal Financing Bank (“FFB”), an arm of the US Treasury.
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VA will guarantee 100 percent of the unpaid principal balance and accrued interest on the program funds disbursed by FFB. |
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The basic interest rate will be established by FFB, at the time the respective advance is made, on the basis of the determination made by the Secretary of the Treasury. The interest rate is determined on the date of the disbursement of funds. One eighth of one percent per annum will be added as a fee (calculated based on the outstanding principal balance owed to FFB), in addition to the interest amount. However, this fee will not be included in the interest rate to be paid to FFB; it is a separate charge added by the loan services and remitted to VA. On September 20, 2005 the interest rate on a 40-year loan was 4.531 percent.
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Additional Sources of Financing
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Projects funded under a program guaranteed loan must include funds and/or the substantial provision of property or services by a state or local government or a nongovernmental entity or entities.
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Sponsors must develop a supportive services program that (a) includes an employment program that is designed to help resident veterans attain long-term employment once they leave the facility and that requires residents to obtain and maintain employment while living in the facility; and (b) clearly identifies how resident veterans will attain and transition to permanent housing. Supportive services to resident veterans will be required throughout the loan term.
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The VA guaranteed loan amount may not exceed 80 percent of the total cost incurred by the borrower to develop the transitional housing facility, including the cost of acquiring and preparing the land, the cost of constructing, remodeling, or rehabilitating the necessary buildings, cost of necessary furniture, equipment and fixtures, and reasonable costs of development including the cost of architects, surveyors, and legal services, but excluding the developer’s fees. VA anticipates that program loans will be 30-40 percent of the total financing for each transaction.
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The loan term is expected to be between 30-35 years and shall be based on VA’s credit underwriting assessment. The loan term may be up to 40-years but only where circumstances warrant. In no event shall a loan terms exceed 40-years.
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The program will provide permanent financing and combined construction and permanent financing, and may include reasonable amounts for the acquisition of furniture, equipment, supplies, or materials for the facility or for supplying the sponsor/borrower with working capital relative to the facility.
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Debt Service Coverage Ratio
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1.10 or better, but ratios above 1.15 are preferred.
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Facilities may provide space for neighborhood retail services or job training programs.
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There is a 20-year deed restriction for loans under the program.
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