Purpose
The
purpose of the Title VI loan guarantee is to assist Indian
Housing Block Grant (IHBG) recipients (borrowers) who want to
finance eligible affordable housing activities, but are unable to
secure financing without the assistance of a federal guarantee.
(A federal guarantee is a pledge by the U.S. Government to repay
all or a portion of the unpaid principal balance and accrued interest
for an obligation by a borrower to a lender after a default under
the terms of the repayment agreement.)
The
Borrower leverages IHBG funds to finance affordable housing activities
today by pledging future grant funds as security for repayment of
the guarantee obligation. A private lender or investor provides
the financing and HUD provides the guarantee to the lender or investor.
The
borrower repays the obligation. However, when a borrower fails to
repay the debt and a default is declared, HUD repays the obligation
and will seek reimbursement from the borrowers future IHBG
grant funds.
Eligibility
Eligible
borrowers:
-
A federally recognized tribe who receives IHBG funds
- A
TDHE authorized by a tribe to receive IHBG funds and is authorized
to make obligations and pledge IHBG funds as security for those
obligations
Eligible
lenders:
-
FHA approved lender
- VA
lender
- Approved
by the Department of Agriculture
- Supervised,
approved, regulated, or insured by any agency of the United States
or
- Any
other lender approved by the Secretary
Eligible
Affordable Housing Activities - Section 202 of NAHASDA:
-
Indian Housing Assistance
- Housing
Development
- Housing
Services
- Housing
Management Services
- Crime
Prevention and Safety Activities
- Model
Activities (with HUD approval)
Getting
started
1.
Applicant/borrower submits a Letter of Request (LoR) to ONAP's
Office of Loan Guarantee (OLG) in Denver. The LoR must include:
-
A detailed project description
-
Demonstrate need for the project
- Summary
of administrative capability
- Estimate
the cost the proposed project
- Calculate
Maximum Commitment Amount
- Estimate
the guarantee amount
2.
OLG provides a copy of the LoR to the Area ONAP for comments regarding:
-
Unresolved audit findings
- Applicants
financial management capacity
- Applicants
administrative capabilities
OLG
will review the applicants Indian Housing Plan and most
recent Annual Performance Review.
3.
Following a satisfactory review, HUD issues a Preliminary Letter
of Acceptance (PLA), which is HUDs determination that the
Title VI project is an eligible affordable housing activity and
that the borrower may proceed with processing the Title VI application.
However, the PLA does not constitute HUDs approval of the
Title VI project or the loan guarantee
4.
Applicant/Borrower selects a Lender who:
-
Negotiates terms with borrower
-
Assembles credit package
-
Performs the underwriting, and
-
Submits two draft application packages to OLG
5.
The OLG reviews the application package. A copy of the package
is provided to the Area ONAP for its comments.
6.
OLG reviews the application package and evaluates risk based upon:
-
Borrowers ability to repay and furnish security for the
guarantee
-
Ratio of Debt Service to annual IHBG
-
Determined need for the activity described in detail and supported
by demographic study
-
Lenders underwriting criteria
-
Outstanding issues (if any) from Area ONAP
OLG
will complete the initial assessment within 30 days. Subsequent
requests for information may cause processing delays.
7.
HUD issues a Letter of Commitment to lender.
8.
Lender closes and submits originals of executed closing documents.
9.
HUD reviews closing documents; issues Certificate of Guarantee
to the lender.
Things
you should know for project development
Indian Housing
Plan (IHP) - The Title VI project must be identified in an
IHP found to be in compliance.
Environmental
Review - Must be conducted in accordance with the provisions of
the National Environmental Policy Act and HUD regulations, and
must be completed before IHBG/NAHASDA (including Title VI) funds
are obligated, committed or distributed.
24
CFR part 50 - HUD conducts the Environmental Review. A copy
of the Environmental Assessment and Compliance Findings for the
Related Laws, form HUD-4128, must be in the Title VI application
package; or
24
CFR part 58 - Tribe is the Responsible Entity. A completed
Authorization for Use of Grant Funds, form HUD-7015.16, must be
in the Title VI application package
Project Development
Dwelling
Construction and Equipment (DC&E) costs
DC&E
costs are the maximum per unit cost. The borrower is responsible
to assure that DC&E costs do not exceed limits. Variances up
to 105% of published DC&E may be approved by the Area ONAP;
variances beyond 105% must be approved by the Deputy Assistant Secretary
(ONAP) for ONAP
DC&E costs are published annually - current notice is Notice
PIH 2000-30 (TDHE).
Umbrella
TDHE - serves more than one Tribe - For a Title VI activity, the
umbrella TDHE pledges IHBG funds on behalf of multiple tribes:
- Tribes share repayment responsibilities which must be set
forth in writing and agreed to by all participants
- Repayment
obligation is a contractual one among HUD, TDHE and tribes
- Each
tribe must identify its share of the debt
- Activity
and repayment responsibility must be described in each IHP (where
applicable)
Low-Income
Requirement - NAHASDA objective: To promote affordable housing
activities . . . for low-income Indian families whose income does
not exceed 80 percent of the median income for the area.
- Assistance is limited to low-income Indian families
- Exceptions:
1. Homeownership under development activities, Sec. 202(2) of
NAHASDA, and model activities, Sec. 202(6)
2. Title VI loan guarantee activities to house non low-income
Indian families because housing cannot reasonably be met without
such assistance, as approved by the Secretary.
Secondary
Markets - Fannie Mae, through their American Communities Fund,
has agreed to purchase Title VI guaranteed loans. Fore more information
regarding secondary markets, you may contact: Mr. Walt Patton
at (202) 752-2529.
Delinquency and default processing
Delinquency
When a borrower fails to make a timely payment, HUD will, upon notification
from the lender:
- Facilitate the payment currently due the lender through a withdrawal
from borrowers IHBG LOCCS account in accordance with the
terms of the Title VI Contract Between HUD and the Borrower; and/or
- withdraw invested IHBG funds in accordance with the terms of
the Title VI Custodial Agreement Letter(s)
Default
Conditions of a default are described in the financial documents.
- Borrower fails to make scheduled payment(s)
- Lender declares default, notifies HUD, and may request HUD to
accelerate the obligation
HUD authorizes
the lender to accelerate the obligation
- Lender submits a claim to HUD for the unpaid principal balance
and accrued interest
- HUD will take future IHBG funds or other repayment resources
in accordance with the Title VI Contract Between HUD and the Borrower
Contact HUD
Department
of Housing & Urban Development
Office of Native American Programs
Office of Loan Guarantee, Title VI
451 Seventh St. SW, Room 4126
Washington DC 20410
Phone: (202) 401-7914
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