Community Development Block Grants Section 108 Loan Guarantees

To provide communities with a source of financing for economic development, housing rehabilitation, public facilities, and large scale physical development projects.

To provide communities with a source of financing for economic development, housing rehabilitation, public facilities, and large scale physical development projects.

Eligible Applicants include: metropolitan cities and urban counties, i.e., CDBG entitlement recipients; nonentitlement communities that are assisted in their submission of applications by States that administer the CDBG program; nonentitlement communities eligible to receive CDBG funds under the HUD-Administered Small Cities CDBG program; and Insular Areas (American Samoa, Guam, Northern Mariana Islands, and the Virgin Islands). The public entity may be the borrower or it may designate a public agency to be the borrower. Furthermore, HUD's FY 2018 and FY 2019 appropriations acts continue HUD's authority to provide loan guarantees to States borrowing on behalf of local governments in nonentitlement areas.

The principal beneficiaries are low and moderate income persons.

For purposes of determining eligibility, the Community Development Block Grant (CDBG) rules and requirements apply. As with the CDBG program, all projects and activities must either principally benefit low- and moderate-income persons, aid in the elimination or prevention of slums and blight, or meet urgent needs of the community.

The maximum repayment period for a Section 108 loan is twenty years. Repayment schedules and terms are negotiable. Restriction on time permitted to spend guaranteed loan funds is specified in contract executed by HUD and the borrower.

Preapplication Coordination: Preapplication requirements are found in 24 CFR Section 570.704. Presubmission requirements are similar to those applicable for the Community Development Block Grants program. Proposed activities must be consistent with a unit of local government's Consolidated Plan submitted for HUD's Community Planning and Development Programs. This program is eligible for coverage under E.O. 12372, "Intergovernmental Review of Federal Programs." An applicant should consult the office or official designated as the single point of contact in his or her State for more information on the process the State requires to be followed in applying for assistance, if the State has selected the program for review.

Applications are reviewed against criteria set forth at 24 CFR 570.704.

Upon approval of an application, HUD will issue to the applicant an offer of commitment to guarantee notes or other obligations issued by the applicant or its public agency designee. The commitment will be subject to compliance with applicable requirements and such conditions as HUD may specify in the commitment document. Furthermore, borrowers are required to pledge current and future CDBG funds as security for the loan guarantee. HUD also requires that the loan guarantee be secured with other collateral. Beginning in FY 2016, borrowers are required to pay a fee based on a percentage of loan disbursements (2% in FY 2020). The fee is applied only at the time of loan disbursement and may be financed as part of the guaranteed loan.

Approximately 45 days from submission of complete application to appropriate HUD Field Office and Program Office.