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Housing Policy --- Section 7-2

Subsidy – Homeownership Developments
Policy Statement

DND will provide loans to developers of affordable homeownership projects to assist with costs that are in excess of construction and/or subsidy financing and equity resources.

Eligible homeownership developments involve the new construction or rehabilitation of a property that will ultimately be owned and occupied by a household as their primary residence. This also includes 1 - 4 family properties where the owner will occupy one unit with the balance of the units offered for rent by that owner. The amount of each request should be limited to the least amount of public funds necessary to make the project feasible, should be restricted to eligible costs directly related to the housing development project, and must comply with cost and underwriting standards currently accepted as industry standards by all other lenders involved in the project.

Amount: The amount of funds will be limited to the gap between the anticipated sales proceeds and the approved total development costs. Generally, per unit commitments will not exceed $50,000. In addition, 100% of any excess sales proceeds that might result from cost savings during construction or from a higher then anticipated sales price due to changes in the market must be returned to DND to reduce the amount of the publicly funded capital contribution. For projects that include market rate unrestricted units, the amount of any excess sales proceeds may be split, with 50% paid to the Developer as additional fee and 50% paid to the subsidy providers, DND & the State, to reduce the amount of capital subsidy provided to the project.

Term: The term of this assistance will be the lesser of the date of the construction loan closing to the date the property is sold to the selected homebuyer or two (2) years.

Interest Rate: The interest rate charged will depend upon the needs of the project given the terms of the other funding sources and the projects ability to achieve the anticipated public benefit. To minimize the gap between anticipated sales proceeds and total development costs, an interest rate of zero percent (0%) is a generally accepted practice.

Repayment Terms: The conditions for payment will always be based on the needs of the particular funding request. Payments of principal and/or interest during the construction period will be deferred to minimize development costs. Since the total development cost usually exceeds the value or the approved sales price of the property, the borrower is released from any financial obligation at the point of sale to the eligible buyer (assuming all of the conditions detailed in the loan documents have been met).

7-2 (11/03)

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