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1 1 (April 27, 2022)

handle is hein.crs/govefyh0001 and id is 1 raw text is: I if ssonoi Resa Updated April 27, 2022 HUD Section 108 Loan Guarantee Program: An Overview The Section 108 Loan Guarantee program (Section 108) is one of several Department of Housing and Urban Development (HUD) programs designed to support local community and economic development activities. It is a source of flexible financing for which grantees of the Community Development Block Grant (CDBG) can carry out large-scale projects, by pledging current and future CDBG for a guaranteed loan. HUD considers Section 108 loan guarantee applications on a noncompetitive, rolling basis. Private lenders finance Section 108 loans with a full faith and credit guarantee by the federal government. The Section 108 program shares similar programmatic structure and flexibility with the CDBG program. These factors may position Section 108 as a useful tool for community and economic development as local governments face an uncertain financial future and shifting community development priorities. For instance, Section 108 funds can be used for activities related to long-term disasterrecovery or forresilience against future disasters. This In Focus describes availability of and access to program financing, summarizes the Section 108 program structure, discusses annualprincipal loan amount maximums, and outlines some policy considerations. Ava~iabihity of Financing Section 108 funds are made available to CDBG recipients on an ongoing basis, allowing participating communities to apply for funds anytime during the year. Typically, the qualified loan amount is five times greater than a CDBG grantee's annual allocation (minus any outstanding loan balances), which allows borrowers to maximize program funds for projects that would not neces s arily be feasible within a given CDBG program year. Program Structure and Adrnistration Like CDBG, the Section 108 program derives its authority from Title I of the Housing and Community Development Act of 1974 (42 U.S.C. §5301 et seq.). CDBG eligibility and program requirements are also generally applicable to Section 108. For more information on CDBG, please see CRS Report R43520, Community Development Block Grants and Related Programs: A Primer, by Joseph V. Jaroscak. Eligible Entities CDBG entitlement communities, insular areas, and states (on behalf of nonentitlement communities) are eligible to leverage their annual CDBG allocations for Section 108 financing. Recipients of Section 108 loans may execute planned activities directly, or relend the funds to a third party, including private companies, to carry out the eligible activities. Eligible Activities All eligible activities must meet one of the three national objectives of the conventional CDBG progrant 1. principally benefit low- and moderate- income (LMI) persons; 2. aid in the prevention or elimination of slums or blight; or 3. meet an urgent need by addressing conditions that pose a serious and immediate threat to the health and s afety of residents. As is the case with CDBG program funds, 70% of a borrower's Section 108 loan funds must meet the objective of principally benefitting low- and moderate-income persons. Section 108 activities must also comply with program requirements outlined in 24 C.F.R. §570 Subpart M, as well as CDBG rules and crosscutting federal regulations (e.g., Davis-Bacon). The majority of eligible Section 108 program activities fall into one of four broad categories: 1. economic development; 2. public facilities and infrastructure; 3. housing rehabilitation; and 4. debt servicing and related fees. Though broadly similar, eligible Section 108 activities are somewhat more constrained than CDBG. Unlike CDBG, Section 108 funds cannotbe used for public service activities, nonfederal cost share, or long-term planning activities. Application Process Prior to submissionof a Section 108 application, eligible communities are required to make a draft available for public comment, hold a minimum of one pre-submission public hearing, and address any comments provided (24 C.F.R. §570.704). This process must comply with a local citizen participation plan, developed by the public entity applying for Section 108 funds. This plan may be consistent with the participation plan required in the HUD consolidated planning process. Communities then finalize and submit their application for review and approval by HUD (24 C.F.R. §570.704). The relevant HUD Field Office and HUD Financial Management Division review Section 108 applications simultaneously. If the application clears review, the Deputy Assistant Secretary for Grant Programs considers it for approval. In general, HUD attempts to review and approve an application within 45 days, barring any delays associated with programmatic or financial aspects ofthe application.

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