Section XV: Loan Guarantee Recovery Fund

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(Administered by the Office of Community Planning and Development)

1. Purpose

Section 4 of the Church Arson Prevention Act of 1996 establishes the Loan Guarantee Recovery Fund under which HUD guarantees loans made by financial institutions to assist certain nonprofit organizations (those described in section 501(c)(3) of the Internal Revenue Code of 1986) that have been damaged as a result of arson or terrorism.

2. Eligible Activities

Guaranteed loan funds may be used for activities necessary to address damage caused by acts of arson or terrorism, including:

         (a) acquisition of real property;

         (b) acquisition and installation of personal property;

         (c) rehabilitation;

         (d) construction, reconstruction, or replacement of real property improvement;

         (e) clearance, demolition and removal of buildings, fixtures and improvements on real property;

         (f) site preparation;

         (g) architectural, engineering and similar services;

         (h) acquisition, installation and restoration of security systems;

         (i) refinancing existing indebtedness; and

         (j) other necessary project costs.

3. Funding Allocations

For the cost of loan guarantees under section 4, the Secretary is authorized to use up to $5,000,000 of the amounts made available for fiscal year 1996 for the credit subsidy provided under the General Insurance Fund and the Special Risk Insurance Fund. Funds are available to subsidize total loan principal, any part of which is to be guaranteed, not to exceed $10,000,000.

Legal Authority: Section 4 of the Church Arson Prevention Act of 1996 (P.L. 104-155, approved July 3, 1996). 24 CFR Part 573 (published September 6, 1996 at 61 FR 47403).

Program Status: CPD has conducted extensive outreach to potential borrowers and lenders, and expects to guarantee the first Section 4 loans early in 1997.