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 borrower’s 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
• Applicant’s financial management capacity
• Applicant’s administrative capabilities
  

OLG will review the applicant’s Indian Housing Plan and most recent Annual Performance Review.

3. Following a satisfactory review, HUD issues a Preliminary Letter of Acceptance (PLA), which is HUD’s 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 HUD’s 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:

• Borrower’s 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
• Lender’s 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 - The 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.

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 borrower’s 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