[Code of Federal Regulations] [Title 24, Volume 3] [Revised as of April 1, 2004] From the U.S. Government Printing Office via GPO Access [CITE: 24CFR570.705] [Page 157-159] TITLE 24--HOUSING AND URBAN DEVELOPMENT CHAPTER V--OFFICE OF ASSISTANT SECRETARY FOR COMMUNITY PLANNING AND DEVELOPMENT, DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT PART 570_COMMUNITY DEVELOPMENT BLOCK GRANTS--Table of Contents Subpart M_Loan Guarantees Sec. 570.705 Loan requirements. (a) Limitations on commitments. (1) If loan guarantee commitments have been issued in any fiscal year in an aggregate amount equal to 50 percent of [[Page 158]] the amount approved in an appropriation act for that fiscal year, HUD may limit the amount of commitments any one public entity may receive during such fiscal year as follows (except that HUD will not decrease commitments already issued): (i) The amount any one entitlement public entity may receive may be limited to $35,000,000. (ii) The amount any one nonentitlement public entity may receive may be limited to $7,000,000. (iii) The amount any one public entity may receive may be limited to such amount as is necessary to allow HUD to give priority to applications containing activities to be carried out in areas designated as empowerment zones/enterprise communities by the Federal Government or by any State. (2) In addition to the limitations specified in paragraph (a)(1) of this section, the following limitations shall apply. (i) Entitlement public entities. No commitment to guarantee shall be made if the total unpaid balance of debt obligations guaranteed under this subpart (excluding any amount defeased under the contract entered into under Sec. 570.705(b)(1)) on behalf of the public entity would thereby exceed an amount equal to five times the amount of the most recent grant made pursuant to Sec. 570.304 to the public entity. (ii) State-assisted public entities. No commitment to guarantee shall be made if the total unpaid balance of debt obligations guaranteed under this subpart (excluding any amount defeased under the contract entered into under Sec. 570.705(b)(1)) on behalf of the public entity and all other State-assisted public entities in the State would thereby exceed an amount equal to five times the amount of the most recent grant received by such State under subpart I. (iii) Nonentitlement public entities eligible under subpart F of this part. No commitment to guarantee shall be made with respect to a nonentitlement public entity in the State of Hawaii if the total unpaid balance of debt obligations guaranteed under this subpart (excluding any amount defeased under the contract entered into under Sec. 570.705(b)(1)) on behalf of the public entity would thereby exceed an amount equal to five times the amount of the most recent grant made pursuant to Sec. 570.429 to the public entity. No commitment to guarantee shall be made with respect to a nonentitlement public entity in the State of New York if the total unpaid balance of debt obligations guaranteed under this subpart (excluding any amount defeased under the contract entered into under Sec. 570.705(b)(1)) on behalf of the public entity would thereby exceed the greater of five times: (A) The most recent grant approved for the public entity pursuant to subpart F of this part, (B) The average of the most recent three grants approved for the public entity pursuant to subpart F of this part, excluding any grant in the same fiscal year as the commitment, or (C) The average amount of grants made under subpart F of this part to units of general local government in New York State in the previous fiscal year. (b) Security requirements. To assure the repayment of debt obligations and the charges incurred under paragraph (g) of this section and as a condition for receiving loan guarantee assistance, the public entity (and State and designated public agency, as applicable) shall: (1) Enter into a contract for loan guarantee assistance with HUD, in a form acceptable to HUD, including provisions for repayment of debt obligations guaranteed hereunder; (2) Pledge all grants made or for which the public entity or State may become eligible under this part; and (3) Furnish, at the discretion of HUD, such other security as may be deemed appropriate by HUD in making such guarantees. Other security shall be required for all loans with repayment periods of ten years or longer. Such other security shall be specified in the contract entered into pursuant to Sec. 570.705(b)(1). Examples of other security HUD may require are: (i) Program income as defined in Sec. 570.500(a); (ii) Liens on real and personal property; (iii) Debt service reserves; and [[Page 159]] (iv) Increments in local tax receipts generated by activities carried out with the guaranteed loan funds. (c) Use of grants for loan repayment. Notwithstanding any other provision of this part: (1) Community Development Block Grants allocated pursuant to section 106 of the Act (including program income derived therefrom) may be used for: (i) Paying principal and interest due (including such issuance, servicing, underwriting, or other costs as may be incurred under paragraph (g) of this section) on the debt obligations guaranteed under this subpart; (ii) Defeasing such debt obligations; and (iii) Establishing debt service reserves as additional security pursuant to paragraph (b)(3) of this section. (2) HUD may apply grants pledged pursuant to paragraph (b)(2) of this section to any amounts due under the debt obligations, the payment of costs incurred under paragraph (g) of this section, or to the purchase or defeasance of such debt obligations, in accordance with the terms of the contract required by paragraph (b)(l) of this section. (d) Debt obligations. Debt obligations guaranteed under this subpart shall be in the form and denominations prescribed by HUD. Such debt obligations may be issued and sold only under such terms and conditions as may be prescribed by HUD. HUD may prescribe the terms and conditions of debt obligations, or of their issuance and sale, by regulation or by contractual arrangements authorized by section 108(r)(4) of the Act and paragraph (h) of this section. Unless specifically provided otherwise in the contract for loan guarantee assistance required under paragraph (b) of this section, debt obligations shall not constitute general obligations of any public entity or State secured by its full faith and credit. (e) Taxable obligations. Interest earned on debt obligations under this subpart shall be subject to Federal taxation as provided in section 108(j) of the Act. (f) Loan repayment period. The term of debt obligations under this subpart shall not exceed twenty years. (g) Issuance, underwriting, servicing, and other costs. Each public entity or its designated public agency issuing debt obligations under this subpart must pay the issuance, underwriting, servicing, trust administration and other costs associated with the private sector financing of the debt obligations. Such costs are payable out of the guaranteed loan funds and shall be secured under paragraph (b) of this section. (h) Contracting with respect to issuance and sale of debt obligations; effect of other laws. No State or local law, and no Federal law, shall preclude or limit HUD's exercise of: (1) The power to contract with respect to public offerings and other sales of debt obligations under this subpart upon such terms and conditions as HUD deems appropriate; (2) The right to enforce any such contract by any means deemed appropriate by HUD; (3) Any ownership rights of HUD, as applicable, in debt obligations under this subpart.