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Housing Policy --- Section 1

Pre-Construction Loans
Policy Statement

DND may provide preconstruction loans to assist non- and for-profit developers with up-front development costs on eligible housing projects.  Developers are required to seek preconstruction funding from other financing sources (i.e., CEDAC, LISC, etc.) prior to requesting a pre-construction loan from DND.

Policy

Type: 

  • Early Release preconstruction loans may be made to move a proposed housing development to a critical juncture such as receipt of building permits, construction loan closing, or acquisition.  Early Release preconstruction loans will be funded through early releases of existing DND fund awards or commitments.

Amount:  The amount of each request should be limited to the minimum amount necessary to assist the proposed housing development to achieve certain development benchmarks, for example design development for bidding, construction drawing for permits, funding applications for construction and permanent loans, etc. 

Match: For-profit developers will be required to match the preconstruction funds received from DND.  All professionals whose services are included in the preconstruction budget will be expected to defer a portion, or all, of their fees.

Term:  The term of preconstruction loans will be for the shortest period of time.  The term shall not exceed the earlier of the construction loan closing date for the project or the date of any sale, assignment, conveyance, or other transfer of the property under consideration.

Interest Rate:  The interest rate for preconstruction loans will be 0%.

Repayment Terms:  Payments during the term of the loan will be deferred.  Preconstruction loans will either be due and payable in full at construction loan closing or incorporated in DND’s overall project subsidy.  If incorporated into DND’s overall project subsidy, preconstruction loan security documents should be discharged at construction loan closing.

Collateral:  Loans will be evidenced by a Promissory Note, Business Credit Agreement, and, if the developer owns the site, a Mortgage. 

Uses:  Preconstruction budgets may include, but are not limited to, costs related to consultant fees; site assessments, environmental, architectural, and engineering reports; preparation of plans and specifications.  DND shall NOT approve any Pre-construction Budgets that include costs related to the acquisition, direct construction; organizational development fees, unless the housing proposal has received the removal of grant conditions from HUD and all other funding commitments, with associated terms and conditions, have been fully executed by all parties.


1 (12/09)

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