[Code of Federal Regulations]
[Title 24, Volume 3]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 24CFR570.704]

[Page 153-157]
 
                 TITLE 24--HOUSING AND URBAN DEVELOPMENT
 
  CHAPTER V--OFFICE OF ASSISTANT SECRETARY FOR COMMUNITY PLANNING AND 
        DEVELOPMENT, DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
 
PART 570_COMMUNITY DEVELOPMENT BLOCK GRANTS--Table of Contents
 
                        Subpart M_Loan Guarantees
 
Sec. 570.704  Application requirements.

    (a) Presubmission and citizen participation requirements. (1) Before 
submission of an application for loan guarantee assistance to HUD, the 
public entity must:
    (i) Develop a proposed application that includes the following 
items:
    (A) The community development objectives the public entity proposes 
to pursue with the guaranteed loan funds.

[[Page 154]]

    (B) The activities the public entity proposes to carry out with the 
guaranteed loan funds. Each activity must be described in sufficient 
detail, including the specific provision of Sec. 570.703 under which it 
is eligible and the national objective to be met, amount of guaranteed 
loan funds expected to be used, and location, to allow citizens to 
determine the degree to which they will be affected. The proposed 
application must indicate which activities are expected to generate 
program income. The application must also describe where citizens may 
obtain additional information about proposed activities.
    (C) A description of the pledge of grants required under Sec. 
570.705(b)(2). In the case of applications by State-assisted public 
entities, the description shall note that pledges of grants will be made 
by the State and by the public entity.
    (ii) Fulfill the applicable requirements in its citizen 
participation plan developed in accordance with Sec. 570.704(a)(2).
    (iii) Publish community-wide its proposed application so as to 
afford affected citizens an opportunity to examine the application's 
contents and to provide comments on the proposed application.
    (iv) Prepare its final application. Once the public entity has held 
the public hearing and published the proposed application as required by 
paragraphs (a)(1)(ii) and (iii) of this section, respectively, the 
public entity must consider any such comments and views received and, if 
the public entity deems appropriate, modify the proposed application. 
Upon completion, the public entity must make the final application 
available to the public. The final application must describe each 
activity in sufficient detail to permit a clear understanding of the 
nature of each activity, as well as identify the specific provision of 
Sec. 570.703 under which it is eligible, the national objective to be 
met, and the amount of guaranteed loan funds to be used. The final 
application must also indicate which activities are expected to generate 
program income.
    (v) If an application for loan guarantee assistance is to be 
submitted by an entitlement public entity simultaneously with the public 
entity's submission for its entitlement grant, the public entity shall 
include and identify in its proposed and final consolidated plan the 
activities to be undertaken with the guaranteed loan funds, the national 
objective to be met by each of these activities, the amount of any 
program income expected to be received during the program year, and the 
amount of guaranteed loan funds to be used; the public entity shall also 
include in the consolidated plan a description of the pledge of grants 
required under Sec. 570.705(b)(2). In such cases the proposed and final 
application requirements of paragraphs (a)(1) (i), (iii), and (iv) of 
this section will be deemed to have been met.
    (2) Citizen participation plan. The public entity must develop and 
follow a detailed citizen participation plan and make the plan public. 
The plan must be completed and available before the application is 
submitted to HUD. The plan may be the citizen plan required for the 
consolidated plan, modified to include guaranteed loan funds. The public 
entity is not required to hold a separate public hearing for its 
consolidated plan and for the guaranteed loan funds to obtain citizens' 
views on community development and housing needs. The plan must set 
forth the public entity's policies and procedures for:
    (i) Giving citizens timely notice of local meetings and reasonable 
and timely access to local meetings, information, and records relating 
to the public entity's proposed and actual use of guaranteed loan funds, 
including, but not limited to:
    (A) The amount of guaranteed loan funds expected to be made 
available for the coming year, including program income anticipated to 
be generated by the activities carried out with guaranteed loan funds;
    (B) The range of activities that may be undertaken with guaranteed 
loan funds;
    (C) The estimated amount of guaranteed loan funds (including program 
income derived therefrom) proposed to be used for activities that will 
benefit low and moderate income persons;
    (D) The proposed activities likely to result in displacement and the 
public

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entity's plans, consistent with the policies developed under Sec. 
570.606 for minimizing displacement of persons as a result of its 
proposed activities.
    (ii) Providing technical assistance to groups representative of 
persons of low and moderate income that request assistance in developing 
proposals. The level and type of assistance to be provided is at the 
discretion of the public entity. Such assistance need not include the 
provision of funds to such groups.
    (iii) Holding a minimum of two public hearings, each at a different 
stage of the public entity's program, for the purpose of obtaining the 
views of citizens and formulating or responding to proposals and 
questions. Together the hearings must address community development and 
housing needs, development of proposed activities and review of program 
performance. At least one of these hearings must be held before 
submission of the application to obtain the views of citizens on 
community development and housing needs. Reasonable notice of the 
hearing must be provided and the hearing must be held at times and 
locations convenient to potential or actual beneficiaries, with 
accommodation for the handicapped. The public entity must specify in its 
plan how it will meet the requirement for a hearing at times and 
locations convenient to potential or actual beneficiaries.
    (iv) Meeting the needs of non-English speaking residents in the case 
of public hearings where a significant number of non-English speaking 
residents can reasonably be expected to participate.
    (v) Providing affected citizens with reasonable advance notice of, 
and opportunity to comment on, proposed activities not previously 
included in an application and activities which are proposed to be 
deleted or substantially changed in terms of purpose, scope, location, 
or beneficiaries. The criteria the public entity will use to determine 
what constitutes a substantial change for this purpose must be described 
in the citizen participation plan.
    (vi) Responding to citizens' complaints and grievances, including 
the procedures that citizens must follow when submitting complaints and 
grievances. The public entity's policies and procedures must provide for 
timely written answers to written complaints and grievances within 15 
working days of the receipt of the complaint, where practicable.
    (vii) Encouraging citizen participation, particularly by low and 
moderate income persons who reside in slum or blighted areas, and other 
areas in which guaranteed loan funds are proposed to be used.
    (b) Submission requirements. An application for loan guarantee 
assistance may be submitted at any time. The application (or 
consolidated plan) shall be submitted to the appropriate HUD Office and 
shall be accompanied by the following:
    (1) A description of how each of the activities to be carried out 
with the guaranteed loan funds meets one of the criteria in Sec. 
570.208.
    (2) A schedule for repayment of the loan which identifies the 
sources of repayment, together with a statement identifying the entity 
that will act as borrower and issue the debt obligations.
    (3) A certification providing assurance that the public entity 
possesses the legal authority to make the pledge of grants required 
under Sec. 570.705(b)(2).
    (4) A certification providing assurance that the public entity has 
made efforts to obtain financing for activities described in the 
application without the use of the loan guarantee, the public entity 
will maintain documentation of such efforts for the term of the loan 
guarantee, and the public entity cannot complete such financing 
consistent with the timely execution of the program plans without such 
guarantee.
    (5) The drug-free workplace certification required under 24 CFR part 
24 (appendix C).
    (6) The certification regarding debarment and suspension required 
under 24 CFR part 24 (appendix A).
    (7) The anti-lobbying statement required under 24 CFR part 87 
(appendix A).
    (8) Certifications by the public entity that:
    (i) It possesses the legal authority to submit the application for 
assistance

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under this subpart and to use the guaranteed loan funds in accordance 
with the requirements of this subpart.
    (ii) Its governing body has duly adopted or passed as an official 
act a resolution, motion or similar official action:
    (A) Authorizing the person identified as the official representative 
of the public entity to submit the application and amendments thereto 
and all understandings and assurances contained therein, and directing 
and authorizing the person identified as the official representative of 
the public entity to act in connection with the application to provide 
such additional information as may be required; and
    (B) Authorizing such official representative to execute such 
documents as may be required in order to implement the application and 
issue debt obligations pursuant thereto (provided that the authorization 
required by this paragraph (B) may be given by the local governing body 
after submission of the application but prior to execution of the 
contract required by Sec. 570.705(b);
    (iii) Before submission of its application to HUD, the public entity 
has:
    (A) Furnished citizens with information required by Sec. 
570.704(a)(2)(i);
    (B) Held at least one public hearing to obtain the views of citizens 
on community development and housing needs; and
    (C) Prepared its application in accordance with Sec. 
570.704(a)(1)(iv) and made the application available to the public.
    (iv) It is following a detailed citizen participation plan which 
meets the requirements described in Sec. 570.704(a)(2).
    (v) The public entity will affirmatively further fair housing, and 
the guaranteed loan funds will be administered in compliance with:
    (A) Title VI of the Civil Rights Act of 1964 (42 U.S.C. 2000d et 
seq.); and
    (B) The Fair Housing Act (42 U.S.C. 3601-3619).
    (vi)(A) (For entitlement public entities only.) In the aggregate, at 
least 70 percent of all CDBG funds, as defined at Sec. 570.3, to be 
expended during the one, two, or three consecutive years specified by 
the public entity for its CDBG program will be for activities which 
benefit low and moderate income persons, as described in criteria at 
Sec. 570.208(a).
    (B) (For nonentitlement public entities eligible under subpart F of 
this part only.) It will comply with primary and national objectives 
requirements, as applicable under subpart F of this part.
    (vii) It will comply with the requirements governing displacement, 
relocation, real property acquisition, and the replacement of low and 
moderate income housing described in Sec. 570.606.
    (viii) It will comply with the requirements of Sec. 570.200(c)(2) 
with regard to the use of special assessments to recover the capital 
costs of activities assisted with guaranteed loan funds.
    (ix) (Where applicable, the public entity may also include the 
following additional certification.) It lacks sufficient resources from 
funds provided under this subpart or program income to allow it to 
comply with the provisions of Sec. 570.200(c)(2), and it must therefore 
assess properties owned and occupied by moderate income persons, to 
recover the guaranteed loan funded portion of the capital cost without 
paying such assessments in their behalf from guaranteed loan funds.
    (x) It will comply with the other provisions of the Act and with 
other applicable laws.
    (9) In the case of an application submitted by a State-assisted 
public entity, certifications by the State that:
    (i) It agrees to make the pledge of grants required under Sec. 
570.705(b)(2).
    (ii) It possesses the legal authority to make such pledge.
    (iii) At least 70 percent of the aggregate use of CDBG grant funds 
received by the State, guaranteed loan funds, and program income during 
the one, two, or three consecutive years specified by the State for its 
CDBG program will be for activities that benefit low and moderate income 
persons.
    (iv) It agrees to assume the responsibilities described in Sec. 
570.710.
    (c) HUD review and approval of applications. (1) HUD will normally 
accept the certifications submitted with the application. HUD may, 
however, consider relevant information which challenges the 
certifications and require additional information or assurances

[[Page 157]]

from the public entity or State as warranted by such information.
    (2) The HUD Office shall review the application for compliance with 
requirements specified in this subpart and forward the application 
together with its recommendation for approval or disapproval of the 
requested loan guarantee to HUD Headquarters.
    (3) HUD may disapprove an application, or may approve loan guarantee 
assistance for an amount less than requested, for any of the following 
reasons:
    (i) HUD determines that the guarantee constitutes an unacceptable 
financial risk. Factors that will be considered in assessing financial 
risk shall include, but not be limited to, the following:
    (A) The length of the proposed repayment period;
    (B) The ratio of expected annual debt service requirements to 
expected annual grant amount;
    (C) The likelihood that the public entity or State will continue to 
receive grant assistance under this part during the proposed repayment 
period;
    (D) The public entity's ability to furnish adequate security 
pursuant to Sec. 570.705(b), and
    (E) The amount of program income the proposed activities are 
reasonably estimated to contribute toward repayment of the guaranteed 
loan.
    (ii) The requested loan amount exceeds any of the limitations 
specified under Sec. 570.705(a).
    (iii) Funds are not available in the amount requested.
    (iv) The performance of the public entity, its designated public 
agency or State under this part is unacceptable.
    (v) Activities to be undertaken with the guaranteed loan funds are 
not eligible under Sec. 570.703.
    (vi) Activities to be undertaken with the guaranteed loan funds do 
not meet the criteria in Sec. 570.208 for compliance with one of the 
national objectives of the Act.
    (4) HUD will notify the public entity in writing that the loan 
guarantee request has either been approved, reduced or disapproved. If 
the request is reduced or disapproved, the public entity shall be 
informed of the specific reasons for reduction or disapproval. If the 
request is approved, HUD shall issue an offer of commitment to guarantee 
debt obligations of the borrower identified in the application subject 
to compliance with this part, including the requirements under Sec. 
570.705(b), (d), (g) and (h) for securing and issuing debt obligations, 
the conditions for release of funds described in paragraph (d) of this 
section, and such other conditions as HUD may specify in the commitment 
documents in a particular case.
    (5) Amendments. If the public entity wishes to carry out an activity 
not previously described in its application or to substantially change 
the purpose, scope, location, or beneficiaries of an activity, the 
amendment must be approved by HUD. Amendments by State-assisted public 
entities must also be approved by the State. The public entity shall 
follow the citizen participation requirements for amendments in Sec. 
570.704(a)(2).
    (d) Environmental review. The public entity shall comply with HUD 
environmental review procedures (24 CFR part 58) for the release of 
funds for each project carried out with loan guarantee assistance. These 
procedures set forth the regulations, policies, responsibilities and 
procedures governing the carrying out of environmental review 
responsibilities of public entities. All public entities, including 
nonentitlement public entities, shall submit the request for release of 
funds and related certification for each project to be assisted with 
guaranteed loan funds to the appropriate HUD Field Office.
    (e) Displacement, relocation, acquisition, and replacement of 
housing. The public entity (or the designated public agency) shall 
comply with the displacement, relocation, acquisition, and replacement 
of low/moderate-income housing requirements in Sec. 570.606 in 
connection with any activity financed in whole or in part with 
guaranteed loan funds.

[59 FR 66604, Dec. 27, 1994, as amended at 60 FR 1917, Jan. 5, 1995; 61 
FR 11481, Mar. 20, 1996]