Section 108 Loan Guarantee Program
Section
108 is the loan guarantee provision of the Community Development Block Grant (CDBG)
program. Section 108 provides communities with a source of financing for
economic development, housing rehabilitation, public facilities, and
large-scale physical development projects. Section
108 is one of the most potent and important public investment tools that HUD
offers to local governments. It allows them to transform a small portion of
their CDBG funds into federally guaranteed loans large enough to pursue
physical and economic revitalization projects that can renew entire
neighborhoods. Such public investment is often needed to inspire private
economic activity, providing the initial resources or simply the confidence
that private firms and individuals may need to invest in distressed areas.
Section 108 loans are not risk-free, however; local governments borrowing funds
guaranteed by Section 108 must pledge their current and future CDBG allocations
to cover the loan amount as security for the loan.
Loan
commitments are often paired with Economic
Development Initiative (EDI) or Brownfield
Economic Development Initiative (BEDI) grants, which can be used to pay
predevelopment costs of a Section 108-funded project. They can also be used as
a loan loss reserve (in lieu of CDBG funds), to write-down interest rates, or
to establish a debt service reserve.
Eligible
applicants include the following public entities: 1) Metropolitan cities and
urban communities (i.e. CDBG Entitlement recipients); 2) Non-entitlement
communities that are assisted in the submission of applications by States that
administer the CDBG program; 3) Non-entitlement communities eligible to receive
CDBG funds under the HUD-Administered Small Cities CDBG program (Hawaii). The
public entity may be the borrower or it may designate a public agency as the
borrower.
Activities
eligible for Section 108 financing include: 1) economic development activities
eligible under CDBG; 2) acquisition of real property; 3) rehabilitation of
publicly owned real property; 4) housing rehabilitation eligible under CDBG; 5)
construction, reconstruction, or installation of public facilities (including
street, sidewalk, and other site improvements); 6) related relocation,
clearance, and site improvements; 7) payment of interest on the guaranteed loan
and issuance costs of public offerings; 8) debt service reserves; 9) public
works and site improvements in colonias; and 10) in limited circumstances,
housing construction as part of community economic development, Housing
Development Grant, or Nehemiah Housing Opportunity Grant programs.
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Funding Category: |
Federally
guaranteed loans through states and local governments that receive CDBG
funding to help fuel large economic development projects and other revitalization
activities. |
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Target Population: |
Residents of HUD-designated CDBG entitlement or non-entitlement communities. |
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Funding Available: |
For FY 2002, $608.696 million. Appropriation for FY 2001 was $1.261 billion. |
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Application Information: |
For more information on the CDBG Section 108 loan
guarantee program, your local HUD field office* will be
able to assist you. When applying for a Section 108 loan, the field office is
the first to become involved in reviewing the application. You can contact
the Section 108 office at HUD headquarters in Washington, D.C. at
202.708.1871* or 202.708.1506*, or by mail at: Section 108 Loan Guarantee
Program, Office of Community Planning and Development, U.S. Department of
Housing and Urban Development, 451 7th Street, SW Room 7206, Washington, D.C.
20410 |
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Contact: |
For technical guidance, contact Mr. Paul Webster, Director, Financial Management Division, at the above address or at 202.708.1871* or Mr. Nelson R. Bregon, Deputy Assistant Secretary for Grant Programs, Office of Community Planning and Development, at the above address or at 202.708.1506*. |
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Links To More Info: |
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Administering Agency: |