Browse Questions and Answers
Under Title VI of the Native American Housing Assistance and Self-Determination Act of 1996 (NAHASDA), the tribe or its Tribally Designated Housing Entity (TDHE) pledges a portion of its Indian Housing Block Grant (IHBG) funds to HUD. In turn, HUD will guarantee a lenderâ€™s loan to the tribe/TDHE.
The guarantee protects the lender from a payment default by the tribe/TDHE. The guarantee enables a lender to offer loan terms that would not generally be available to a borrower.
The tribe/TDHE pledges the need portion of its annual IHBG funds and the financed projectâ€™s income to HUD as collateral for a loan guarantee. The pledged funds can still be used by the tribe/TDHE for eligible IHBG activities, including debt service, unless the tribe/TDHE has defaulted on a previous loan.
A tribe/TDHE that receives and administers IHBG funds is an eligible borrower. Since a tribe has the authority to withdraw the designation of a TDHE, the tribe must be a party to the pledge of IHBG funds.
The loan funds must be used for affordable housing activities eligible under NAHASDA.
Does a tribe/TDHE have to comply with IHBG regulations if the money is actually coming from a private lender?
Yes, Title VI and IHBG funds are authorized under NAHASDSA and are subject to the IHBG regulations at 24 CFR Part 1000. IHBG regulations apply to any project that uses funds from a loan guaranteed under Title VI.
No, but the project must be located in the area that the tribe/TDHE currently serves, using its NAHASDA funding. The project must also be included in the tribeâ€™s Indian Housing Plan.
In general, there are several steps in the process.
- The tribe/TDHE submits an application for a preliminary review of acceptance from HUD. HUD reviews the proposed projectâ€™s feasibility and the tribeâ€™s/TDHEâ€™s capacity to implement the project. If acceptable, HUD will issue a preliminary letter of acceptance (PLA) that is valid for 180 days.
- The tribe/TDHE selects a lender and applies for a loan from that lender.
- The lender requests a firm commitment from HUD, so that a loan guarantee may be
issued. When the request is approved, HUD will issue a firm commitment to the lender
specifying the terms that must be met for a guarantee to be issued. The lender and
tribe/TDHE have 90 days to close the loan.
- The lender and tribe/TDHE meet the conditions for the guarantee and close the loan.
Once closed, HUD will issue the guarantee to the lender.
HUD is guaranteeing the lenderâ€™s loan to the tribe/TDHE. The lender is responsible for meeting
the terms and conditions for the guarantee.
No, HUD guarantees payment of 95% of the unpaid principal and interest on the loan. The guarantee does not include late fees or other expenses. The guarantee does not cover any other costs or fees, including late fees or legal expenses.
The maximum loan amount depends on the amount of the tribeâ€™s annual Indian Housing Block Grant. IHBG allocations are based on a formula that considers two basic factors: the number of units of Formula Current Assisted Stock that the grantee has in its inventory; and the need of each tribal community. The need portion of the IHBG is calculated using weighted factors such as the local populationâ€™s income levels, the condition of existing housing, and housing costs. The maximum commitment amount under Title VI is limited to five times the need portion of the annual IHBG allocation.
Yes, but the total amount of available funding for all of the Title VI loans cannot exceed the maximum commitment amount, which is five times the need portion of the annual IHBG allocation.
Yes, the annual debt service must not exceed the need portion of the IHBG allocation.
No, once the guarantee is issued, the maximum amount of that guarantee is fixed and does not
change, regardless of any changes in the annual IHBG allocation.
The loan has no real estate collateral. The guarantee is the primary collateral for the lender. The
tribe/TDHE pledge of the need portion of the IHBG allocation is the collateral for HUDâ€™s guarantee.
No, the pledge of IHBG funds is made to HUD, and cannot be pledged a second time.
Yes, additional collateral may be negotiated between the tribe/TDHE and the lender. For example, it is common for a lender to request cash collateral for the 5% that is not covered by the guarantee. Depending on the type of account or collateral, the additional collateral may be an eligible financing expense under NAHASDA.
No, HUD must approve the demand for full repayment of interest and principal.
No, as of September 2014, there had been no claims paid on a guarantee through the 15-year life of the program.
LOAN DOCUMENT QUESTIONS
There are no application forms. However, HUD does provide a checklist of documents needed to qualify. The checklist generally follows the documentation requirements that lenders have for commercial development financing.
Yes, HUD does not have documents for the lender to use for its loan. However, HUD will review the lenderâ€™s documents and may require some changes.
The required documents include a contract for the pledge of the tribeâ€™s/TDHEâ€™s IHBG funds and a certification of compliance with NAHASDA.
The required documents include a guarantee agreement and the guarantee certificate.
The Title VI Loan Guarantee Program is designed to be flexible; however, the loan terms must meet the needs of the project. The maturity date should not exceed 20 years, and the tribe/TDHE may not be a party to any hedge structure for fixed-rate financing.
Does the tribe/TDHE need to include the Title VI project and financing in its annual Indian Housing Plan (IHP)?
Yes, HUD requires the IHP to include the project, loan proceeds, and estimated debt service. The useful life of the project must equal or exceed the loan term.
Yes, loan advances that pay for construction costs need to be based on completed work.
The lender must provide quarterly payment reports that include the current principal balance and current interest rate, as well as the amount of principal and interest payments. In addition, the lender must report any payment delinquencies that are more than 30 days late.
Yes, the project must be included in the tribeâ€™s/TDHEâ€™s Annual Performance Report, annual audit, and the self-monitoring plan. In addition, the debt service should be included in the annual Indian Housing Plan.
Yes, HUD will include a Title VI project in its on-site monitoring reviews. In addition, it may undertake a desk review of all or a portion of a project.
Yes, the loan terms may be modified with HUDâ€™s written approval of the changes.
To learn more about using the Title VI Loan Guarantee Program for your housing project, contact
Jake.R.Coury@hud.gov or call (202) 402-3507
Native American Program Specialist (Title VI)
U.S. Department of Housing
and Urban Development
Office of Loan Guarantee
451 Seventh Street, S.W.
Washington, DC 20410