Category Descriptions

1. DIRECT LOANS:

Funding sources provide homeownership and/or development loans directly to individuals or corporations.

2. GRANTS:

A grant may be in the form of a direct cash contribution from government or a "gift" or sale of publicly owned land and/or buildings at a reduced cost. A grant is normally used to promote housing and neighborhood commercial revitalization programs as well as larger redevelopment projects. The key advantage to a grant is the reduction of up-front acquisition costs to the user/developer resulting in "instant equity."

3. INTEREST RATE SUBSIDIES:

The purpose of interest subsidy incentives is to reduce or in some cases stabilize the cost of borrowing for businesses and developers wanting to expand. The net effect results in either jobs created and retained or an increase in affordable housing units for low- and moderate-income households. Interest rate subsidies may take three forms: 1) a direct cash grant to lending institutions to write-down the bank's interest rate on a business or housing loan; 2) a government sponsored, low interest loan subordinated to a participating commercial lender; or 3) a lower than market-rate loan to a qualified borrower as a result of an advance or pass through provision from a public entity, i.e., Federal Home Loan Bank or tax-exempt bond authorities.

4. LOAN GUARANTEES AND MORTGAGE INSURANCE:

Loan guarantee and mortgage insurance programs are available for the housing needs of targeted populations either through direct state-sponsored programs or traditional federal programs such as the Small Business Administration and the Department of Housing and Urban Development Federal Housing Administration (FHA). Generally, loan guarantees consist of government securing a lender's loan by guaranteeing a portion of the debt against default, subject to the originator properly servicing the loan. The source of funds for the guarantee will vary according to the guarantor. Federal guarantees, such as the Small Business Administration's programs, are budgeted as part of the agency's annual appropriation.

5. MATURITY LINKED FUNDING:

Linked deposit programs are interest rate risk management tools for lenders. The key for the lender is tying a source and use of funds together. This allows lenders to make longer term, fixed-rate loans and fund them with deposits of a similar maturity. The deposit source is usually state government or a state sponsored pension fund. To access the funds often requires proof of job creation or job retention. In some instances, the deposit funds may be obtained at a below market rate provided the borrower also gets a reduced rate. In no case do the deposited funds act as collateral or security for the loans.

6. RENTAL ASSISTANCE:

As defined by the U.S. Department of Housing and Urban Development (HUD), rent supplements are "payments to owners of private housing on behalf of qualified low-income tenants" as authorized by Congress in 1965. The principal instrument of rent supplements is the HUD Section 8 program, which has three major components. The tenant-based components are the Existing Housing Certificate Program and the newer Existing Housing Voucher Program. The project-based components are New Construction, Substantial Rehabilitation, Moderate Rehabilitation, and Loan Management Set-Aside. Project-based rental assistance is available only under contracts currently in effect. Under the Existing Housing Certificate and Housing Voucher Programs, private owners receive the difference between what tenants can pay and the contract rent. Vouchers differ from certificates in that they provide tenants greater freedom of choice in selecting housing and the payment standard.

7. SECONDARY MORTGAGE MARKETS:

Congress created the secondary mortgage market in the late 1930s to provide liquidity and stability to America’s housing market. The secondary market purchases mortgage loans from primary lenders such as mortgage companies, savings institutions and commercial banks, thus replenishing the supply of mortgage funds of those institutions. Once purchased, loans are packaged into mortgage backed guaranteed securities and sold to investors or retained by the purchaser in its own portfolio.

8. SUBORDINATED MORTGAGE:

Subordinated mortgage financing consists of a direct loan from government or another source to finance a house and is in a subordinated collateral position to the primary commercial lender. In addition to a direct loan, a subordinated mortgage may be in the form of debentures or bonds. A subordinated mortgage has several advantages: 1) it serves to supplement and reduce the primary lender's exposure and risk of financing a project; 2) it improves the collateral position of the primary lender; and 3) it possibly lowers the cost of financing to the borrower by blending the interest rates of a "soft second" with the conventional market rate.

9. TAX ABATEMENTS:

The property tax on the improvements to private development projects is "forgiven" or abated up to 100% by government for a specified period of time, e.g., 10 years. Property tax paid to the local taxing authority during the abatement period is based on the property's assessed value prior to the project expansion. This program is generally offered as a tool to promote new construction or rehabilitation designated blighted area, such as an urban renewal district, or an enterprise zone. Tax abatements are administered on a county-wide or local level.

10. TAX CREDITS:

Tax credits are available for equity investors and/or owners and developers promoting a variety of development or redevelopment activities: eligible housing projects, business expansions, job creation and retention activities, historic preservation, and investments in qualified machinery and equipment and real property. Tax credits are authorized and monitored by federal, state, or local governments and are administered either directly by government or through a quasi-governmental organization.

Commonly utilized tax credits include the Historic Preservation Tax Credit and Low-Income Housing Tax Credits. Historic Preservation and Low-Income Housing Tax Credits are authorized by the federal government and are usually administered by a state investment or bond authority.

11. TECHNICAL ASSISTANCE:

Management and technical assistance is the provision of practical knowledge, advice, and guidance to enhance capability, expertise, and skill-level. Government may directly provide assistance or fund eligible for-profit or nonprofit grant recipients to provide technical assistance as a service to target audiences.

GLOSSARY OF TERMS

A

Affordable Housing
Housing sponsored by a nonprofit corporation, singly or jointly, with public or private interests that requires some form of public financial support, such as tax incentives or rent supplements. Affordable housing is designed to alleviate housing shortages in areas by assisting low/moderate income persons in meeting their housing financial obligations. Affordable housing includes the purchase, new construction, or purchase/rehabilitation of single-family and multifamily units.

B

Bank-Owned Community Development Corporation (CDC)
A for-profit or nonprofit corporation capitalized by one or more banks to make debt or equity investments in local communities. A bank-owned CDC can perform a variety of activities which banks are prohibited from doing in the course of business including: buying, selling, developing and managing real property. They can be an equity investor; form limited partnerships and joint ventures; make loans; and provide technical assistance and counseling services as well. A bank-owned CDC can be owned either as a subsidiary of a bank or more than one bank holding company, or as a mixed ownership among banks, private investors and other public and private organizations. Bank owned CDCs require regulatory approval. Activities must generally promote and benefit the welfare and development of the local community or low/moderate income populations.

C

Certified Development Company (CDC)
Also known as a 504 Corporation
A nonprofit corporation that provides long-term, fixed-rate financing for the acquisition of fixed assets for small and medium-sized businesses. The CDC must be approved by the Small Business Administration (SBA) and be sponsored by the local government and/or business community. The CDC must: operate in a defined geographic area; have a board of directors of at least 25 members of the community representing government, private business, private lending institutions and nonprofits; provide a full-time professional staff who can market the program and process, close and service its loan portfolio; have the financial ability to sustain its operations on a continuous basis; and have as its primary mission to "promote and assist the growth and development of business concerns in its operation area."

Co-Housing
A hybrid form of housing that combines private and communal forms of living. Residents occupy individual complete housing units and share additional kitchen, dining and recreational facilities with other residents. Ownership and design may take a variety of forms.

Community Action Agency
A publicly and/or privately funded agency that provides social services such as fuel assistance, day-care and education classes to lower-income residents in surrounding communities. Community action agencies may also develop and manage affordable housing units.

Community-Based Organizations
A nonprofit organization serving disadvantaged populations in rural or urban communities. Services provided may include health care assistance, education opportunities for targeted groups, employment and training services and counseling for home ownership. Community based organizations are funded from a variety of sources including state and local governments, foundations, private business, individuals and community or grass-roots fund raisers.

Community Development Block Grant (CDBG)
An annual allocation of federal funding for state and local governments administered by the U. S. Department of Housing and Urban Development (HUD). CDBG funds are allocated to entitlement communities such as cities over 50,000 in population, state governments to assist small cities and as discretionary grants for Indian tribes, insular areas and technical assistance. CDBG funds have flexibility which enables grantees to fund projects promoting neighborhood revitalization, economic development, and improved community facilities and services. Although the use of CDBG funds are primarily discretionary, 75 percent of the allocation must be used to benefit low/moderate-income residents, aid in the prevention of slums and blight and meet other urgent community development needs. Funds are generally administered locally by state or city departments of economic development (also see Entitlement Community).

Community Development Corporation (CDC)
A nonprofit community-based organization established to provide programs and services promoting affordable housing development, business revitalization activities, and/or provide technical assistance to residents or business owners. CDCs typically vary in size and scope, are tax exempt and have boards of directors which may include local residents, public officials, lenders and other community lenders.

Community Development Credit Union (CDCU)
A nonprofit credit union chartered to serve member residents and small businesses in low-income communities. Unlike a private company/employee-based credit union, the CDCU is tax exempt and may attract deposits and program funding from foundations, churches, individuals and private business. Federally chartered CDCUs are regulated by the state. In general, CDCUs offer services not provided by mainstream financial institutions, such as small loans at below-market rates to individuals who might not otherwise qualify for bank loans. CDCUs usually rely on banks, foundations and other investors for deposits to support their work.

Community Development Loan Fund (CDLF)
A private, nonprofit, financial intermediary that assembles investment capital and lends to community-based organizations and low-income projects. CDLFs assemble capital primarily from private, social investors in the form of loans, paying below-market interest on those funds and passing this subsidy to its borrowers. Lenders to CDLFs may have some control over the term and rate of interest on their loans, but terms are generally more flexible than conventional financing. CDLFs can also provide borrowers with technical assistance to reduce the risk of losses. Since CDLFs are unregulated lenders, they have flexibility in their organizational structure, but may be subject to state laws and regulations. In most cases, they are incorporated as 501(c)(3) nonprofits.

Community Housing Development Organization (CHDO)
A private nonprofit tax-exempt organization that has among its purposes the provision of affordable housing and which maintains accountability to low-income community residents by assuring at least one-third low-income community representation on its governing board and providing a formal process for low-income program beneficiaries to advise in its decision-making on design, siting, development and management of affordable housing. CHDOs are eligible for funding under the HOME program.

Community Land Trust
A private community-sponsored nonprofit that owns land in perpetuity and leases it at affordable prices. Under this arrangement, only the improvements such as affordable housing units are sold to eligible low/moderate-income families. Leasing the land reduces the acquisition cost to families. Community land trusts control the terms of sale of all properties and improvements on the land to maintain long-term interests, while allowing lease holders to retain general ownership rights of their properties.

Community Reinvestment Act (CRA)
A federal law enacted by Congress in 1977 requiring financial institutions to meet community credit needs and authorizing regulators to assess progress in this regard. CRA is a credit law in which institutions are encouraged to consider all segments of their community, including low/moderate-income populations, in the marketing and servicing of credit needs.

Congregate Housing
A residential facility consisting of private apartments and central dining facilities in which services are provided to tenants to enable them to remain independent.

Consolidated Plan
A five-year planning document required of state and local governments and HOME consortia that incorporates the Comprehensive Housing Affordability Strategy (CHAS) and community development plan of a jurisdiction and also serves as an application for funding under any of HUD’s Community Planning and Development formula grants. In addition, many competitive funding programs require a certification of consistency with the jurisdiction’s consolidated plan in order to quality for funding.

Consumer Credit Protection Act
A federal law enacted in 1968, subsequently amended and comprised of the following consumer credit protection laws: Truth in Lending Act, Fair Credit Reporting Act, Equal Credit Opportunity Act, Fair Debt Collection Practices Act, Electronic Funds Transfer Act, Fair Credit Billing Act, and Consumer Leasing Act.

Cooperative
A multifamily housing unit in which residents form a corporation for the purpose of owning and managing the property collectively. Membership in the cooperative gives residents the right to occupy the units and take part in the management and operation of the building. Residents own shares in the corporation proportional to their share of the mortgage, rather than owning individual units. If a resident leaves, the new resident purchases the share(s) and assumes responsibility for that part of the mortgage.

D

Department of Housing and Urban Development (HUD)
The principal federal agency responsible for programs designed to address the country's housing needs, fair housing opportunities and improvement and development of communities. HUD was established by Congress in 1965 to provide: mortgage insurance for single-family and multifamily dwellings and loans for home improvements; a secondary market through the issuance and guarantee of mortgage-backed securities for investors in Government National Mortgage Association (Ginnie Mae); direct loans for construction or rehabilitation of housing projects for various targeted groups; housing subsidies for low/moderate-income families; grants to cities, towns and states for community development activities; and enforcement of fair and equal housing opportunities.

Department of Veterans Affairs (VA)
A federal agency established in 1930 as an executive department by the Department of Veterans Affairs Act. The VA comprises three organizations which administer veteran programs; the Veterans Health Administration; the Veterans Benefits Administration; and the National Cemetery System. The Va’s home loan guaranty program is operated by the Benefits Administration.

E

Entitlement Community
A city or urban county with a population of at least 50,000 which can apply for and receive Community Development Block Grant (CDBG) funds directly from the federal government. Communities having less than 50,000 people are non-entitlement areas and can only receive CDBG funding through the state office of economic development and/or community development.

Equal Credit Opportunity Act
A fair credit lending law enacted by Congress in 1974 that prohibits discrimination in a credit transaction on the basis of race, color, religion, national origin, sex, marital status, age, receipt of public assistance or the exercise, in good faith, of rights granted by the Consumer Credit Protection Act. The scope of the Act covers all commercial and consumer credit transactions.

Expiring Use Restrictions
The contractual right of owners of low/ moderate-income rental housing to prepay their publicly assisted mortgages and convert their property to market-rate housing.

F

Fair Housing Act
Title VIII of the Civil Rights Act of 1968 which, among other requirements, prohibits lenders from discriminating in their housing-related lending activities against any person because of race, color, religion, national origin, or sex. The Act covers transactions regarding the sale or rental of housing, including the purchasing, constructing, improving, repairing, or maintaining of a dwelling. Persons or groups may file complaints with the Department of Housing and Urban Development.

Farm Credit Administration
An independent financial regulatory agency responsible for ensuring the safe and sound operation of the banks, associations, affiliated service organizations and other entities that collectively comprise the Farm Credit System, and protecting the interests of the public and those who borrow from Farm Credit institutions or invest in Farm Credit securities. The Administration conducts examinations of the various Farm Credit lending institutions, including Farm Credit banks, banks for cooperatives, the National Bank and the Agricultural Credit Associations. Management of the Administration is vested with the Farm Credit Administration Board, whose three full-time members are appointed to terms of six (6) years by the President with the advice and consent of the Senate.

Federal Agricultural Mortgage Corporation (Farmer Mac)
A federally chartered, privately-owned corporation created in 1987 by the Agricultural Credit Act. The purpose of Farmer Mac is to facilitate the development of a secondary market for agricultural real estate loans by: 1) authorizing the issue of guaranteed mortgage-backed securities and guaranteeing the payment of principal and interest to holders of those securities; and 2) purchasing the guaranteed portion of Farmers Home Administration loans from lenders.

Federal Home Loan Mortgage Corporation (Freddie Mac)
A congressionally-chartered private agency that purchases conventional residential mortgage loans from originating financial institutions. As part of its mission of creating a national secondary market, Freddie Mac either maintains its loans in portfolios or packages and sells them as securities. Freddie Mac also offers programs with flexible underwriting guidelines for lower-income home buyers. Freddie Mac was established in 1970 as part of the Federal Home Loan Bank system to serve thrift institutions, but became a private agency under the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA).

Federal Housing Administration (FHA)
An agency created by the National Housing Act of 1934 to relieve unemployment and stimulate private lending for housing construction and rehabilitation. FHA became part of HUD in 1965. Since its inception, FHA's primary activity has been to insure home mortgage loans originated by approved lenders to borrowers who do not meet conventional underwriting criteria. FHA mortgage insurance also is available for a variety of multifamily housing and residential care purposes.

Federal Housing Finance Board
An independent regulatory agency established in August 1989, by the Federal Home Loan Bank Act, as amended by FIRREA. The Finance Board, which succeeds the Federal Home Loan Bank Board, supervises the Federal Home Loan Banks (FHL Banks) to ensure: that they carry out their housing finance missions; that they remain adequately capitalized; that they are able to raise funds in the capital markets; and that they operate in a safe and sound manner.

Federal National Mortgage Association (Fannie Mae)
A congressionally-chartered private agency established in 1937 to purchase and package conventional residential mortgages as securities and sell them to investors. In 1987, Fannie Mae created its office of low/moderate-income housing to provide low-income home buyers and nonprofit organizations more flexible underwriting guidelines.

G

Government National Mortgage Association (Ginnie Mae)
A wholly-owned government corporation administered by HUD which guarantees FHA and VA mortgage-backed securities and manages a portfolio of federally-owned mortgages. Ginnie Mae was created in 1968 through amendment of Title II of the National Housing Act to create a secondary market for investors holding Ginnie Mae securities. Ginnie Mae warrants the performance of the issuer and assures the investors holding these securities that they will receive their principal and interest. Ginnie Mae is a guarantor. It does not issue, sell, or buy securities.

Grant(s)
Grants generally provided by a government agency, often to reduce up-front acquisition costs of a housing or commercial development project. The grant may come in the form of a direct cash contribution or as a reduction in sales price of publicly-owned or publicly-held real property.

H

Home Investment Partnership Program (HOME)
A program created under Title II of the Affordable Housing Act of 1990 and funded by HUD. HOME provides funding to states, metropolitan cities, urban counties and consortia (contiguous units of governments) to provide affordable housing for low/moderate-income populations. In order to receive HOME funds, a jurisdiction must submit a Comprehensive Housing Affordability Strategy (CHAS) to HUD for approval.

HOME Investment Trust Fund
A line-of-credit account established by HUD for each participating jurisdiction whose CHAS and program description are approved. The fund provides the financing for all affordable housing projects which are based on the participating jurisdiction's approved housing strategy.

Home Mortgage Disclosure Act (HMDA)
A federal law enacted in 1975 and amended and extended permanently in 1988 that requires financial institutions to annually compile and disclose data about mortgage loan applications and home improvement and home-purchase loan extensions and denials. Required information also includes the race, sex and income of the applicant/borrower as well as the disposition of the application. HMDA was enacted to provide the public with information to show whether lenders were serving the housing credit needs of their communities and to help public officials distribute public sector investments in areas to attract private investments.

Homesteading
Programs designed to enhance private acquisition and ownership of government-owned residential or commercial properties. Properties are generally acquired or repossessed by local government due to failure to pay taxes and are resold at a later date to interested individuals or families at a very nominal price, usually one dollar. In some instances, the government may also provide low-interest rehabilitation loans to assist the new owners in meeting building and safety codes along with a stipulation that the purchaser(s) must continuously occupy the unit.

Housing Partnership
A nonprofit organization that brings together the interests, resources, and financial support of public agencies, local businesses, banks and community organizations to increase the supply of affordable housing in a particular city or state. Housing partnerships generally work with local, nonprofit, community development corporations who design and implement projects, secure the necessary financing and provide technical assistance to the project.

I

Inclusionary Zoning
A zoning ordinance that requires a developer to provide affordable housing and identify its source(s) of funding as part of a development plan. Typically, a developer makes a certain percentage of the units affordable in exchange for a density bonus.

Interest Subsidy
Direct or indirect government assistance that reduces a borrower's interest cost on a loan. A subsidy can take one of three forms: a direct cash grant to a lending institution to write down the bank's interest rate on a business or housing loan; a government-sponsored low-interest loan; or a below-market rate loan to a qualified borrower made possible by an advance or pass-through provision from a public entity. Projects qualifying for subsidies are deemed to provide some public benefit.

Intermediary
A nonprofit organization which provides training and technical assistance and financial support to other community-based nonprofits. Intermediaries are generally experienced, mature nonprofits with the ability to apply for and administer grants and loan funds to assist less experienced organizations. Funding sources for intermediaries include government, foundations and the private sector.

L

Land Bank

A public or quasi-public agency that provides below-market financing for the purchase or refinancing of undeveloped land for affordable housing and economic revitalization projects. Properties may be titled in the name of the agency due to eminent domain or state urban renewal statutes, or still be owned by various private individuals but designated for purchases by the agency as part of a planned development.

Limited Appreciation
A restriction on the amount of appreciation that a property owner can realize at the point of sale. The restriction may be required by government to minimize real estate speculation and maintain the affordability of the project.

Limited Equity Homeownership
Multifamily residences owned and controlled by tenants, in which resale values are restricted in order to maintain the long-term affordability of the units. These residences are often developed with public assistance in the form of relaxed zoning regulations or the discounted sale of publicly-owned land, in order to reduce development costs. Limited equity residences can take the form of a cooperative or a condominium.

Loan Consortium
A collaboration among financial institutions in which capital is committed by the participating institutions to finance affordable housing and community development projects. Loan funds pledged to the consortium may be pooled as a separate, distinct fund or as a participation whereby each institution would choose to commit individually on a per loan basis. A consortium can be organized by the lenders as a for-profit or nonprofit corporation, or less formally, by a loan participation agreement. A consortium may have a paid staff or use a third-party agent to originate and/or service the loans.

Loan Guarantee
A program by which a local, state, or federal government agency guarantees a portion of a lender's loan to a business or home owner against default. Loan guarantee programs are available for lenders assisting small business, housing and agricultural borrowers. Loan guarantees generally are provided to projects which offer a public benefit but are considered too risky to finance conventionally without the guarantee.

M

Manufactured Home
A transportable structure, comprised of one or more modules each of which is built on a permanent chassis, which is designed for occupancy as a single-family resident. To be eligible for HUD mortgage insurance, a new manufactured home must meet standards published by HUD.

Modular Housing
Also know as Prefabricated Housing
Factory-built housing assembled on site. Construction costs are usually lower than comparable site-fabricated homes.

Mortgage Insurance Program
Under these programs, the Department of Housing and Urban Development (HUD) insures approved lenders against losses on mortgage loans. Originally, the programs were administered by the Federal Housing Administration (FHA), which is now part of HUD. The acronyms HUD and FHA are often used interchangeably.

All of HUD’s single-family and multifamily programs are authorized by the enabling legislation of the National Housing Act, and each program is generally referred to by its section of the Act, for example: Section 203 (b), mortgage insurance for the purchase of a single-family home, or Section 223 (f), mortgage insurance for the purchase of a multifamily property.

Mutual Housing
Housing developed, owned, and managed by a nonprofit partnership organization (Mutual Housing Association) for long-term affordability. Residents pay a one-time, refundable, membership fee and a monthly percentage of their incomes to the Association. In turn, they receive a lifetime right of occupancy and a voice in the management of the property through residents' councils and property management committees. Residents also have majority representation on the Association's board of directors, whose other members include community and business leaders and public officials. Also, residents have the right to nominate a family or household member as a successor in the event of a move or death.

N

Neighborhood Housing Services (NHS)
A nation-wide network of neighborhood-based service organizations that are locally operated and funded. An NHS focuses on a specific community or communities to increase the supply of affordable housing and promote neighborhood stability by providing below-market construction and rehabilitation financing, technical assistance and support for resident activism. Board members include local residents, business leaders, public officials and community representatives. All NHSs receive assistance from, and are monitored by, the Neighborhood Reinvestment Corporation.

Neighborhood Housing Services of America
A private, nonprofit, tax-exempt corporation which purchases non-bankable loans from local Neighborhood Housing Services' revolving loan funds.

Neighborhood Reinvestment Corp. (NRC)
A congressionally chartered, federally funded, public, nonprofit corporation established in 1978 to assist in the revitalization of lower-income neighborhoods and in the provision of affordable housing in these neighborhoods. NRC works mainly through local Neighborhood Housing Services organizations, providing training, operational grants and technical assistance.

R

Rent Supplements
Monthly, subsidized rent payments by the Department of Housing and Urban Development or a public housing authority to owners of private, single- family or multifamily housing which is made available to very low-income and low-income tenants. The rent payments represent the difference between a share of the tenant's adjusted monthly income and the fair market rent. Supplements are made available through HUD's Section 8 certificates and vouchers, and through project-based contracts with owners of multifamily properties.

Resolution Trust Corporation (RTC)
An agency created by Congress under the FIRREA to manage the disposition of failed savings and loan institutions and/or their assets. Specifically, the duties of RTC include: process managing and resolving all cases involving depository institutions which were insured by the former Federal Savings and Loan Insurance Corporation; conducting the operations of the Corporation to maximize the return of value from the sale of assets, while minimizing the impact on real estate and financial markets and losses to the Government; making efficient use of funds provided to the Corporation; and maximizing the availability and affordability of residential real property for low/moderate-income individuals. RTC will cease operations no later than December 31, 1996.

Revolving Loan Fund
A loan fund structured so that repayments to the fund are used to make additional loans. Revolving loan funds may be initially capitalized from either a public funding source, i. e., CDBG or Economic Development Administration funds, or from private sector sources such as financial institutions through a consortium, or a combination of public and private sources. Revolving loan funds can be used for housing and commercial development projects, have more flexible terms and rates and may require matching dollars from the local community. A revolving fund is typically administered by a nonprofit or quasi-public agency. In a consortium arrangement, however, the lenders often hire a professional staff who administers the fund in conjunction with a loan committee.

Right of First Refusal
A right given to nonprofits that allows them to purchase a property before it goes on sale to the general public. Rights of first refusal are often used with expiring use restriction properties and properties owned by the Resolution Trust Corporation.

Rural Development (RD)
Formerly part of Farmers Home Administration
An agency of the Department of Agriculture that operates federal loan programs designed to finance new and improved rural housing, develop community facilities and maintain and create rural employment. RD programs primarily serve communities with populations of less than 25,000.

S

SBA Certified Lenders Program
An SBA-sponsored program in which higher volume SBA guarantee lenders have authority to originate and service SBA loan guarantees. Under the program, the local SBA will approve loan guaranty applications submitted by certified lenders in about three (3) days. Eligible lenders must be experienced users of the SBA loan guarantee programs, and have demonstrated both promptness and thoroughness in SBA loan origination and servicing. losses to the Government; making efficient use SBA Preferred Lenders Program A program sponsored by the SBA which allows experienced SBA lenders to originate, service, collect and commit SBA loan guarantees up to 80% for eligible business loans. In addition, participating lenders can also liquidate the loan, generally without the SBAs prior approval. The program reduces the processing time on credit applications and maximizes the resources of the SBAs best lenders.

Section 8
A program sponsored by HUD, administered in conjunction with public housing authorities, that provides rent supplements some components of which are to private property owners. Rent supplements are provided to owners who lease units to low-income and very-low-income families under Section 8 certificates and vouchers programs. Under the project-based program, funds are provided by HUD to private owners who manage and own the multifamily properties. Properties must meet specified code standards and tenants must qualify as low-income or very-low-income to participate in the programs.

Single Room Occupancy (SRO)
A rental property with units that consist of a single room. The unit may contain kitchen or bathroom facilities, some components of those facilities, or none of those facilities. Sanitary and kitchen facilities may be shared among tenants.

Small Business Administration (SBA)
A federal agency created in 1953 by the Small Business Act to provide financial and management assistance to small business concerns and entrepreneurs. The SBA offers a variety of loans and other types of financial assistance. The majority of business loans are in the form of partial guarantees on loans made by private lenders. The SBA also offers special loan programs for women, minorities, the handicapped, veterans, and very small businesses.

Subordinated Mortgage
A junior or second mortgage that offers reduced interest and/or flexible repayment terms in order to minimize the debt service of the borrower and reduce the primary lender's risk. Subordinated mortgages are typically provided through government programs to help finance both housing and business development projects. Housing programs primarily target lower-income households. Business programs may attach a job creation criterion, i.e., one new job created per $15,000 of second mortgage dollars provided to a project.

Sweat Equity
Direct labor performed by a property owner which contributes to the value of the improvements to a project. For example, a homeowner may directly perform the carpentry or electrical labor for a rehabilitation project. The labor spent on the task has value and contributes to the owner's equity or down payment. Sweat equity also reduces the out-of-pocket cash needed in completing the project.

Syndicated Cooperative
Also Known as a Leasehold Cooperative
A method of cooperative living which involves partnership by outside investors with residents. This is becoming a popular method of development in high-cost housing areas. Investors are able to take advantage of federal tax credits while reducing costs for the cooperative’s members. In return, residents share control over the property and may have to buy out the investors’ shares after a certain period of time. A leasehold cooperative also refers to a cooperative that does not actually own the property, but instead signs a long-term lease with the owner, usually an investor partnership.

T

Tax Abatement
A temporary suspension of property tax payments on the new improvements to private redevelopments. The tax may be abated up to 100 percent on improvements for a specified time and is offered as a redevelopment tool in areas designated as blighted, such as an urban renewal zone or an enterprise zone. These improvements include new construction, as well as rehabilitation or renovation. Generally, only local or county taxing authorities can offer tax abatements.

Tax Credit
Credits offered by various levels of government to induce affordable housing and business expansions and job creation and retention. Tax credits come in four (4) major forms: investment tax credits for business; job creation/retention and training incentives for hiring disadvantaged persons; historic preservation tax credits; and low-income housing tax credits. Tax credits reduce the tax liability of the investors contributing to projects and may also be sold to investors in return for up-front equity investment.

Transitional Housing
Temporary housing for families or individuals who have not yet found permanent housing and require more stability than an emergency shelter. Residents usually stay for several months until their circumstances stabilize.