Homeownership Development Acquisition Loans:
Structure and Terms
Eligible Property Types
Properties must be affordable to households
with incomes of 120 percent or less of area median income. Detached,
attached, and condominium structures are eligible.
Eligible Borrowers
Borrowers must be Housing Partnership Network
members.
Minimum Loan Size
$200,000
Maximum Loan Size
$2,000,000
Loan Terms
- Interest rate. 30-day LIBOR
+ 400 bp, variable monthly, minimum rate 7.0 percent.
- Term. The term of the loan is up to three years. At the borrower's
request and the Housing Partnership Fund's option, the loan
may be extended for up to two six-month periods. An extension
fee equal to 0.5 percent of the outstanding loan balance will
be due at each extension. These extension fee payments will
be credited to the interest owed at loan discharge. Additionally,
following the extension of the loan, current interest payments
will be required.
- Commitment fee. Fee of 1.0 percent, subject to a minimum of $2,000
payable from loan proceeds at origination.
- Application fee. $500 due with application.
- Repayment. The loans are expected to be repaid from financing
sources at the time that permanent financing is put in place, but,
in any event, are fully repayable at the end of the term and
any extensions.
Eligible Uses of Funds
- Purchase price
cash to the seller.
- Repayment of a predevelopment loan.
- Urgent repairs (if existing
structure).
- Site planning and development.
The loan is intended to fill a temporary gap in the array of sources
available for property acquisition.
Collateral and Credit
Borrowers will guarantee repayment, and usually
will be required to provide a subordinate mortgage on the property.
The Fund will require that the borrower obtain a specific authorizing
resolution from its board of directors with respect to the loan.
The Fund will underwrite against the likelihood that the borrower's
permanent financing structure can be implemented and will supply
the funds needed to repay the acquisition loan. Additionally, the
Fund will seek to ensure that property operations can at least
pay current interest on the loan in the event that the aggregation
of permanent financing takes longer than anticipated and the loan
must be extended.
The Fund does not intend to secure cash collateral from the borrower
as this would largely defeat the purpose of the loan. However, the
Fund must conclude that its loan is likely to be repaid in a failed
transaction. Thus, the Fund will evaluate the borrowing record and
lender relationships of the borrower as well as the borrower's financial
stability and depth.
Loan Administration
It is anticipated that loans will generally be
fully drawn down at the outset. If, in certain cases, 100 percent
of the funds are not needed at the time of origination, the Fund
and the borrower will agree to a drawdown schedule.
To Apply for a Loan
Prospective borrowers should submit the following:
- A brief narrative description of the property being purchased,
including name, address, number of units, and existing financing.
- Evidence
of site control in the form of an executed purchase and sales
agreement.
- A schedule of the sources and uses for the acquisition,
identifying likely financing sources and any needed public resources.
- A
schedule of sources and uses at take-out of the acquisition loan.
- A
market study.
- If the property is not currently under a use restriction
or if that restriction is expected to terminate at the acquisition
closing, a description of the use restrictions expected to be imposed
on the property following the closing.
- A development plan timeline.
- Audited financial statements for
the past three years, and the most recent unaudited interim statement.
- Track
record in pursuing and closing similar acquisitions.
- A list of
key staff to be involved in the transactions and their resumes.
- A
$500 application fee.
Please submit these materials to:
Matt Perrenod
Housing Partnership Fund
160 State Street, 5th floor
Boston, MA 02109
(617) 778-1301
perrenod@housingpartnership.net
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