Owner-occupied Rehabilitation - a Direct Loan Model (Hud-1386-cpd, January 1993)

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Direct rehabilitation loans are an efficient and effective way to expand the supply of affordable housing; they enable existing homeowners to improve their own housing conditions and the conditions of their neighborhood.

Many low-income homeowners need to make repairs to their property but are unable to afford the repairs themselves or to obtain private loans to do so.

The HOME Program enables participating jurisdictions to make direct loans to low-income homeowners for housing rehabilitation.

This guidebook is designed to help participating jurisdictions better understand how they may set up such programs.

Direct loans require the participating jurisdiction to take on many roles: that of the lender, who must underwrite and evaluate the credit risks of the borrowers; the construction supervisor, who must ensure that construction meets appropriate standards; and also of counselor or advisor.

This guide is designed to help jurisdictions with program design issues such as the identification of eligible property owners, establishment of levels of assistance, setting terms and conditions for loans, and basic approaches to loan processing and servicing.

It provides several sample forms used in the different stages of loan approval and administration that jurisdictions may find useful in establishing rehabilitation loan programs.