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CED-80-74 1 (1980-03-28)

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Report To The Honorable Bob Traxler

House Of Representatives




Better Cash Management Needed

In HUD's Section 312 Housing

Rehabilitation Loan Program



The Department of Housing and Urban Devel-
opment's Section 312 Rehabilitation Program
offers homeowners loans at only 3 percent in-
terest. Department procedures require local
housing agencies to deposit Federal loan funds
in escrow accounts until needed to pay con-
tractors for completed work.

In some instances local agencies benefit by in-
vesting the funds held in escrow. The Depart-
ment of the Treasury incurs unnecessary in-
terest costs because it borrows money at rates
higher than 3 percent much sooner than re-
quired.

An alternative financing technique, possibly a
letter of credit, should improve cash manage-
ment of the program by timing cash advances
more closely to actual disbursement needs.












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                                                                    CED-80-74
   CCOU                                                         MARCH 28,1980

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