Program Overview
Title VI is an effective public investment tool that HUD offers to federally recognized tribes and Tribally Designated Housing Entities (TDHEs). It provides an additional source of financing for affordable tribal housing activities. It may be used to:
- Create new housing
- Rehabilitate housing
- Build infrastructure
- Construct community facilities
- Acquire land to be used for housing
- Prepare architectural & engineering plans
- Fund financing costs
Take a look at the Success Stories section to see projects that used Title VI financing.
Authorization
The Title VI Loan Guarantee Program is authorized by the Native American Housing Assistance and Self Determination Act of 1996, as amended (25 U.S.C. 4101 et seq.), (NAHASDA), in accordance with the Code of Federal Regulations at 24 CFR Part 1000. NAHASDA and the regulations also authorize the Indian Housing Block Grant Program (IHBG). The requirements of NAHASDA and the regulations apply to all projects using Title VI financing.
Purpose
The purpose of the Title VI loan guarantee is to assist IHBG recipients (borrowers) who want to finance additional grant-eligible construction or development at today’s costs. Tribes can use a variety of funding sources in combination with Title VI financing, such as low-income housing tax credits. Title VI loans may also be used to pay development costs.
Due to the flexibility of the Title VI program, tribes can structure their loans to meet the requirements of their project and negotiate a variety of repayment terms with the lender. Loan terms can range up to 20 years, and payments may be made monthly, quarterly, or annually. Additionally, interest rates can be fixed, adjustable or floating, and are based on an index.
Benefits
Title VI loans benefit tribes and lenders. Tribes benefit by building more housing at today’s costs and using the loan to leverage additional funds from other sources. Improved financial services from lenders permit flexible financing terms. Additionally, tribes are not required to use land as collateral for loans.
Likewise, lenders benefit from administering Title VI loans. Some of these benefits include: limited risk exposure, reduced costs, increased loan marketability, and improved opportunities to market financial services and credit towards meeting community reinvestment goals.
How Does the Title VI Loan Guarantee Program Work?
A tribe/TDHE uses IHBG funds to leverage additional funds to finance affordable housing activities, so that it can undertake larger projects and build at today’s costs. This leverage is created by pledging the need portion of the tribe’s annual IHBG grant and the project’s income as security to HUD in exchange for a Title VI loan guarantee.
In turn, HUD provides a 95% guarantee of outstanding principal, plus accrued and unpaid interest as collateral to the lender. The lender then, provides the financing to the tribe.
Although a tribe/TDHE pledges the need portion to HUD, the funds are not obligated. A tribe/TDHE may use the need portion for completion of the project, other eligible grant activities, or to repay the loan.
The maximum guarantee amount that a tribe/TDHE can borrow is approximately five times the need portion. A tribe/TDHE may have one or more Title VI loans, but the combined total may not exceed the maximum guarantee amount. Click here.
A tribe/TDHE must repay its Title VI loan. However, the repayments may be stretched to 20 years. As the amortization period increases, the annual debt service payments decrease. If a tribe/TDHE fails to repay the debt and a default is declared, HUD will make the loan payments to the lender. HUD will then seek reimbursement from the borrower’s pledged funds. Click here.
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